Debt Ceiling Déjà Vu
Although Democrats and Republicans seemed to lose politically from failing to raise the debt ceiling until the last minute in August 2011,
both parties appear poised for a rerun this October. While we hope Congress avoids such behavior, investors could hear again about the U.S. possibly
defaulting on its payments if the debt ceiling isn’t raised. We think this possibility is remote but want to be sure you’re aware, so you don’t respond to
such fears with actions that could disrupt your financial strategy. Over the past three years, Congress has periodically roiled markets by reaching deficit-related agreements only at the last minute before deadlines. In each case, remember that it did reach an
agreement, and all of the predictions about dire consequences were wrong. As a result, related market declines were short, and market reactions
have also diminished over time as investors have become more accustomed to Congress’ last-minute decision making.*
While we can’t predict exactly what will happen in the fall, we don’t expect the pattern to change. Congress is likely to appear unwilling to agree until
the last minute. So we think you should tune out the noise from Congress and stay invested. Even if the market reacts, we expect any pullback to be
short-term
The Law Office of Beth Mann, P.C. 