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So here we are once again, I try and delicately approach a topic that is very much on the mind of the market but because it deals with politics will inevitably elicit extreme responses. Can we not this time? Is that a thing? The purpose of this post is to inform those who may be unaware of several time sensitive issues with the clock running down that will very much affect the market. I still believe that is a service to those out there who simply don't have time to keep up with the daily play by play in the news. Hopefully I'm right about that! So without further delay, here's 3 events that are playing out in Washington with huge market ramifications. 1) Government Shutdown So didn't we JUST deal with this? Yes and no. In October of this year we faced the dual threat of a government shutdown and debt default. Because Congress is Congress they were unable to reach a long term agreement on funding the government or on raising the debt ceiling. Instead, they passed a short term stop gap measure that kicked the can down the road. Until when? Well, this Friday when. Congress now essentially has today, tomorrow, and Friday to pass a government funding bill or on Saturday the government shuts down. Typically the market has been pretty unconcerned with government shutdowns but as this would affect all government programs dealing with COVID, and as we've seen this week the market is overly concerned with COVID, I believe this shutdown would very much be noticed by the market. This issue is complicated by certain members of Congress refusing to support ANY measure to fund the government that has any funding for Biden's vaccine mandate (source provided below). This measure passing requires both parties agreement and even a single Senator objecting would cause the clock to run out and guarantee a shutdown of the government. This scenario seems very likely to occur. Due to the stakes here I would caution making any short term moves until the issue is resolved. 2) NDAA The National Defense Authorization Act is an annual bill passed by Congress that allocates funds for national defense. This includes paying the troops. The House of Representatives passed this measure back in July but it has since languished in the Senate. They have until Friday to pass it or the previous bill lapses. This means as of Saturday, failure to pass would mean troops stop getting paid and our national defense is unfunded. Typically this bill, as it did in the House when passed, enjoys massive bipartisan support but a vote to pass it yesterday was shut down. If this bill fails to pass I would expect to see any stocks connected with the US military to suffer $RTN , $LMT , $NOC , $BA , $GD just to name a few. 3) Debt Ceiling Last but not least we have our old friend the debt ceiling. In the discord channel (link below) many have been wondering why infrastructure stocks haven't enjoyed the gains they anticipated after the passage of the infrastructure bill. The answer is the debt ceiling. Without raising the ceiling that bill is worthless. They cannot even begin distribution of funding until the ceiling is lifted. Due to lower than expected spending and higher than expected revenue in October the deadline for the ceiling to be passed has moved from 12/3 to 12/15. This deadline is merely a guess and could be sooner or later (some estimates put the hard limit as far out as February). Failure to raise the ceiling would mean the US would be unable to pay it's obligations on interest for US Treasuries and would result in a debt default likely taking down the entire world economy. To complicate matters, two of the largest credit rating agencies in the world have stated that passing this at the last second would constitute sufficient reason to lower the US credit rating. This same situation played out in 2015 and despite the ceiling being raised at the last minute the credit rating of the US was lowered for the first time ever. This resulted in a 17% market correction. I was basically the only person on Public talking about this in October and the market was down by increasing amounts until they passed the stopgap measure extending it until this month. I expect a similar market reaction this time around. The closer we get to the 12/15 deadline, the more volatile the market will get. If your focus is long term this is probably irrelevant to you but if you're engaged in more trading than investing you absolutely need to be aware of this issue and it's affect on the market. 3 serious issues. 3 days for 2 of them and less than 2 weeks for the third. If ANY of these issues fails to be addressed the market WILL react. Regardless of your personal feelings on these issues it's important to be aware that they exist and they will be the central drivers of the market over the next few days/weeks. It's also important to remember that your or my own personal feelings are irrelevant in this context. How the market overall feels is what will drive things up or down. So keep these issues on your radar before making any short term moves. Sources ///// ///// ///// ///// ///// ///// #tcardizzle #debtceiling #government #congress ///// Want up to the minute analysis of these and other market driving trends? Join us
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