Final approval was given by the Senate (a vote of 63-36) to suspend the $31.4 trillion debt limit until January 2025, and the President has promised to sign it. This will allow the government to borrow whatever it needs to pay its debts and outlines new spending levels.
Wall Street seemed to shrug off the whole issue last week - rising before the whole issue got resolved.
So now that we have resolution ......what’s next?
Attention may come back around to inflation and the Fed’s monetary policy. As you can see from the other table, that’s what 25 institutional investors surveyed by the New York Fed ranked as one of their top concerns for the next 12-18 months. But banking-sector stresses and the U.S.-China tensions also could come into focus. Or maybe attention will shift to real estate. Or perhaps Russia-Ukraine.
Do you see the pattern? Wall Street always has to have something to worry about. That’s where the expression, “Wall Street climbs a wall of worry” originated. It means financial markets continue to navigate an endless stream of economic and political uncertainty.
When advisors like ourselves encourage you to "stay the course", one reason for that advice is because we've seen this same pattern occur time after time. While clients can sometimes be concerned over a variety of events, usually the best "course" is to stay generally in the market - not out - with the majority of assets.
Our team's investment process is active, not auto-pilot. Even so, rarely would we recommend to most investors that running to cash is the answer when volatility rears it's ugly head. The negative news around the debt ceiling and eventual positive turn in the stock market is just the latest example of why "stay the course" has been sound time-tested advice.
What the Debt Ceiling Teaches Investors
June 02, 2023