Written January 18, 2023, 3:12 p.mUpdated on January 18, 2023 at 15.29.
Equity markets were expected to test lows this year. But they explore the attics. However, there is another limit, namely the US federal debt.
Treasury Secretary Janet Yellen activated “extraordinary measures” to avoid reaching the legal ceiling of $31.381 billion on Thursday, which would force the government to cut spending. She thinks “to keep” like this until June. Goldman Sachs instead assesses between August and October the materialization of the “biggest political risk” in 2023.
The disagreements in Congress could see the repetition of the economic tensions of 2011. John Plassard, of Mirabaud Securities, recalls that they led to the loss of the US triple A rating by making the markets doubt the safe harbor asset pair excellence.
The “usual measures” in the hands of Treasury Secretary Janet Yellen, without having to resort to a vote in Congress, consist of replenishing the federal coffers by drawing on certain public pension and health care funds (by unwinding investments and ceasing to fill them up).
Goldman Sachs identifies a first moment of tension between the end of August and the beginning of September, when the funds will experience a decline before the payment of corporate tax, which would restore some oxygen until October.
The bank points out that the political and fiscal conditions are similar to those of 1995 and 2011, when the achievement of the debt ceiling created extreme tensions about the financing of the federal state.
One of the factors she particularly watched in late December to anticipate the difficulties of future debates on the federal deficit was the possible return of a single elected official triggering a vote of confidence in the person as the “speaker” of the House of Representatives . However, this risk became a reality during the difficult election in early January of Kevin McCarthy, who made this concession to get his seat. The Republican “speaker” will find himself weakened to arbitrate the disagreements between Democrats and Republicans.
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