United States stocks are likely to face another week of rising turbulence as efforts to settle the budget dispute in Washington drag on, leaving investors worried about the more critical issue of raising the US debt ceiling.Thank you for reading this post, don't forget to subscribe!
Reuters reported that the budget impasse has led to a partial US government shutdown for the past four days, already longer than many investors had expected.
While stocks ended higher on Friday, the Standard and Poor’s 500 posted a loss for the week and the CBOE Volatility index – the market’s fear index – rose to 16.89, up from 13.12 on September 20. The index is still at relatively low levels, but options-market trading suggests investors are starting to guard against increased volatility.
The larger issue for investors is that efforts to solve the budget problem could become entangled with the issue of raising the debt limit. If the $16.7tn borrowing cap is not increased, it could lead to a possible US default.
“It’s not likely, but it’s certainly a remote possibility. That is the big fear, because that’s an event that has not been discounted by the market,” said Quincy Krosby, market strategist at Prudential Financial in Hartford, Connecticut. “And it’s not just a domestic event; it’s a global event.”