A shutdown or debt default isn’t in the market
Commentary: Why are investors so complacent?
The clock is ticking on the prospects for a government shutdown and, even worse, a technical default on U.S. obligations — and investors seem almost blasé about it.
The Standard & Poor’s 500 index (SNC:SPX) is down barely 1% since reaching its all-time high last Wednesday after the Federal Open Market Committee declined to “taper” its $85-billion monthly bond purchases.
Meanwhile, since Labor Day, the yield on the 10-year Treasury note has dropped from nearly 3% to 2.65%. September may be a record month for investment-grade corporate bond issuance. And the CBOE Volatility Index (MDE:VIX) has barely budged.
And every day we move closer to a government shutdown or debt default, with far knottier politics than we had during the debt-ceiling fiasco of summer 2011, after which the U.S. lost its AAA rating from Standard & Poor’s.
“The complacency on this issue is alarming,” Chris Krueger, Washington analyst for Guggenheim Partners, told me earlier this week. “Clearly with Washington policy, everybody’s been focusing on the Fed and the taper,” he said, and are only now looking at the prospects of shutdown or default — and aren’t worrying too much about it.
“Our growing concern is that everyone is far too complacent that just because there has been a deal in all the prior fiscal cliff fights that there has to be a deal in this debt ceiling fight,” he wrote in a note to clients. “There is no evidence to suggest that the debt ceiling will be raised in time.” http://www.marketwatch.com/story/a-shutdown-o...beforebell
