Hitting The Wall As Debt Spikes And Fitch Asks The Question!

This year’s $6.5 trillion rally in stocks hit a wall, following hot labor-market data and a ramp-up in Treasury issuance just a day after a US credit downgrade by Fitch Ratings.

As a result, Wall Street finished lower on Wednesday, with the S&P 500 and Nasdaq Composite down for a second straight day as investors took profits on five months of gains a day after rating agency Fitch cut the U.S. government’s credit rating.

Fitch downgraded the United States to AA+ from AAA late on Tuesday, citing expected fiscal deterioration over the next three years as well as growing government debt. Fitch was the second major agency to cut the country’s rating. In 2011 Standard & Poor’s stripped the country of its triple-A grade.

Pushing back hours before her department is set to ramp up its borrowing to plug a ballooning budget deficit, Treasury Secretary Janet Yellen called the downgrade “arbitrary” and “outdated.” The economy has recently shown signs of resilience and the debt limit was ultimately lifted, she noted.

The US budget deficit surged to record levels when the government spent heavily to support households and businesses as Covid shut down the economy. It shrank last year, but now it’s widening again. The federal deficit hit $1.4 trillion for the first nine months of the current fiscal year, almost triple the year-earlier figure. The US Treasury this week boosted its borrowing forecast for the current quarter to $1 trillion, well above the $733 billion it had predicted in May.

Fitch’s downgrade is a signal that the US needs to get its budgetary process in order ahead of what looks like another political fight this fall, and possibly another government shutdown.

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The Inflation Headfake: Or Something More?

The latest US data on CPI, jobless claims, inventory and producer prices are all signaling potentially lower inflation. Yet the markets still hold to their view of a hike this month in July, as signaled by the FED, and possibly another later.

So what’s going on?

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A Tentative Debt Ceiling Agreement Has Been Reached! [Podcast]

The bare bones of an agreement was announced late Saturday night in the US, and assuming its passed on the hill , the debt ceiling crisis looks like it has been postponed until 2025. As the US markets are closed on Monday for Memorial Day, we can expect Asian markets to react first! It is also a Bank Holiday in the UK!

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Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
A Tentative Debt Ceiling Agreement Has Been Reached! [Podcast]
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A Tentative Debt Ceiling Agreement Has Been Reached!

The bare bones of an agreement was announced late Saturday night in the US, and assuming its passed on the hill , the debt ceiling crisis looks like it has been postponed until 2025. As the US markets are closed on Monday for Memorial Day, we can expect Asian markets to react first! It is also a Bank Holiday in the UK!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

More Debt Ceiling Handbrake Turns Casts A Volatile Outlook…

Just a couple of days ago, markets bounced on the back of hopes talks on raising the US debt limit were in play, on growing confidence a deal to raise the $31.4 trillion debt limit could be reached in coming days, with the benchmark S&P 500 climbing more than 2%. But as this came to a sudden halt, the optimism that had been building through the week fell away. As a result, U.S. stocks ended lower and the dollar lost ground on Friday as the negotiations to raise the U.S. debt ceiling were put on hold, yet moving closer to the deadline to avoid default. Then reports were made suggesting talks had recommenced.

Initial reports that debt ceiling negotiations had reached an impasse rattled markets even as investors were scrutinizing Federal Reserve Chairman Jerome Powell’s remarks in a panel discussion for clues regarding next month’s interest rate decision. In his remarks, Powell said that uncertainties surrounding the lagging impact of past rate hikes and recent bank credit tightening made it unclear whether more monetary tightening will be necessary.

All this is creating febrile markets, where big players can trade the volatility. But others may be best on the sidelines!

CONTENTS

0:00 Start
0:15 Introduction
1:00 Debt Ceiling Impasse?
2:15 Powell On Inflation, Credit and Rates
6:24 US Markets
11:08 Europe and UK
13:40 Asian Markets
17:15 Gold
18:32 Oil
19:40 Australian Markets
21:20 Crypto
22:54 Summary And Close

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In Debt Ceiling Land, What A Difference 24 Hours Can Make!

Market volatility continues, following falls earlier in the week, now we see a boost for US markets, as hopes of a debt ceiling resolution appears closer.

Plus there was more positive news on the Regional Banking issues.

That said, Fed Officials are still taking rates higher and earnings are looking weaker as consumers pull back, so recession is still a potential risk.

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Not 2008 Again, But A Crisis Nevertheless…

The continued pressures on US Regional Banks highlight the risks created by the changed interest rate environment – even if the scenarios are different from the 2007-8 GFC. But banks are under pressure as margins are compressed, and are needing to revisit their strategies, as both ANZ and Macquarie reposted this week. In fact, a credit crunch could well be on the cards.

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Stagflation, Here We Come! [Podcast]

The leading indicators relating to the US economy are screaming Stagflation, as the FED meets this coming week. Yet rates are likely to go higher to tackle rising costs, even as a credit crunch in underway. Not pretty.

The latest edition of our finance and property news digest with a distinctively Australian flavour.

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Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Stagflation, Here We Come! [Podcast]
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Signs That US Credit Growth Is Turning To The Deep Freeze

A recent survey of Texas bankers provides a significant indication of the potential economic slow-down which is underway in the USA. While it is possible Texas may be an outlier, it does chime with other recent data, as household savings balances are being substituted for personal credit, lending standards are being tightened, and commercial credit is throttled back. Combined this is another significant indicator of a potential recession ahead.

The Debt Limit Clock Counts Down – Again!

The US Treasury is fast approaching the debt ceiling, which begs the question – what then? Will Government spending be crimped, will the ceiling be raised again, or will more unconventional strategies be deployed?

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