Markets Recover on US Debt Talks

Markets Recover on US Debt Talks.

Markets around the World started to rise on positive sentiment that the Republicans in the US would agree to an increased debt ceiling being pushed for by Obama’s Democrats.

Yesterday across UK Europe and the West and overnight in the Far East, markets gained approximately 0.6% to 1.5%.

Comment

We do not think the turmoil in the US is over.  No agreement has been reached yet and it is thought that any debt ceiling increase will not solve the US debt issues, but merely offer a stop gap so that the US can meet certain minimum government depart spending requirements to remain functional as well as meeting interest payments due on US government borrowing.

For the US to default on its debt, this would be a disaster on the bond market.  We well remember Black Monday in October 1987 when speculators caused a bond market crash which led to one of the largest 3 day falls in global stock markets.

For client investors, we are staying on a “red investment alert” and are watching developments.