This isn’t the first time this has become an issue over the years and it certainly won’t be the last. Time and time again, we’ve come to this point, but every time before, this gets resolved in one way or another.
Yes, we may be nearing the deadline and it feels like that again. But this time truly this is different?
After talks were postponed last week, the latest headlines suggest we are nowhere near an agreement with reports over the weekend that things are going backwards. Meanwhile, Yellen reiterated that June 1st would be the “hard deadline” but I’d bet it would be somewhere in the first week of June or so.
But whatever the case, I’m inclined to think that this will ever be resolved again – as it has been in every other case in the past three or four decades. It is economic suicide to allow debt ceiling talks to end and politicians should know better, despite how reckless they are.
It’s a game of chicken where both sides want to win and neither wants to accept a loss so to speak. But if no one loses means everyone loses, it would be better to find a solution instead.
The typical guide every time when it comes to debt ceiling concerns is Buy value, sell hysteria – just like any other risk/fear event. And if we see more fear emerge in risk trades next week, I would argue that it should be in the game again this time around.