Last week Congress agreed to a last minute deal to avoid a government shutdown. Now the focus turns to whether they can get their act together to agree on raising the debt ceiling. Technically, the U.S. hit the current debt ceiling limit of $28.4 trillion back on August 1st, but the Treasury has since been drawing down its General Account at the Federal Reserve to meet its obligations. Janet Yellen announced that come October 18th, those funds will have been exhausted.
This leaves investors to wonder what this may mean for the U.S. economy and for their portfolios. The last time this happened was back in 2011 where the credit rating of U.S. debt was downgraded even though the U.S. was able to prevent an actual default of their debt. The implications to the economy could be devastating if this happened at a time when the economy is still trying to pull itself from the hole that the Pandemic created.
One would hope that this scenario is unlikely to occur. However, talks in Washington have thus far not provided any agreeable resolution even through budget reconciliation, where only a simple majority is needed.
With this deadline looming, the markets could experience some heightened volatility during the first few weeks of October, which is historically a more volatile month in and of itself. If you have any questions on how this might impact your portfolio, please reach out to AskFreedom@freedomfamilyoffice.com for a complimentary consultation.