Schaeffersresearch.com: debt ceiling resolution or the lack thereof is the trigger now. The problem is that the market has not factored in the possibility of a default or a downgrade of US credit rating. Should a default or credit rating downgrade actually happen, it is very likely that the market will fall significantly. The fallout of such a default or downgrade is unknown and may very well affect US economic growth negatively.
Chartadvisor.com: the market is oversold, but due to the same reason (above), the oversold market can get more oversold.
My take: stay put. I personally don’t think the US will default on its debt, but a credit rating downgrade is likely, with or without an agreement by Aug. 2. This will affect the market in the near term. I really can’t believe that the politicians from both parties are ignoring the big picture risk to our already weakened economy and care only about their so called “constituents”. Those constituents may not understand what the consequences of a default or a downgrade are for the future. Good politicians are supposed to be visionaries and lead the constituents, not always just act on whatever they want. If all an elected politician does is to reflect whatever his/her constituents want, why do we need a politician? We can very well have a web-based pollster or a robot to do this job.
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