Ed’s Daily Notes for September 23rd   Leave a comment

Bloomberg: U.S. Stocks at Risk With Government Shutdown Looming

Even as the U.S. stock market roars to new highs, helped last week by the Federal Reserve, a risk is rising from another corner of Washington.

Hardening positions on the federal budget and borrowing limit, and recent political setbacks suffered by both President Barack Obama and Republican congressional leaders as they go into the fight, are raising the odds of a government shutdown, debt default or near-miss that could roil equities markets.

My view: A government shutdown is no biggie. Markets may drop for a bit, but the politicians know that the midterm elections are only a year away. If they drag a shutdown out too long, they could face consequences next year.

On the other hand, a debt default would have serious consequences for the U.S., both short and long-term (not to mention the rest of the world). But I would call the odds of a debt default extemely low. It would take specific actions, not inaction, to cause a debt default, and no politician wants to be known as “the guy/girl who bankrupted the country”.

Overall, I see a government shutdown as a buying bonanza.

The Telegraph: Angela Merkel wins historic third term in German elections

Good news for status quo markets:

Angela Merkel is heading for a third term as Germany’s chancellor, as exit polls showed she could even be on course for the historic achievement of an absolute majority in the country’s parliament.

An early projection by the state broadcaster ARD on Sunday evening showed Mrs Merkel’s Christian Democrat party (CDU) winning 301 seats in the 598-seat Bundestag, enough to form a government without a coalition partner. Later projections suggested, however, that she could fall just short of an absolute majority.

Exit polls and early results put the CDU on 42.5 per cent of the vote, a lead of 17 points over the main opposition.

It had been expected that Mrs Merkel would be forced into a “grand coalition” with her main socialist opponents, the Social Democrats. The early results suggested that she might avoid this.

Of course, this could be bad news for countries like Greece. We will see…

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Posted September 23, 2013 by edmcgon in Economy, Market Analysis, News, Politics

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