We all have been bombarded with the drumbeats of the debt ceiling issues and watched the posturing of our esteemed leaders at work. Give any of them the red light of a camera and let the politics begin! I want you to know we are watching closely their movements and have spent the better part of today on conference calls with portfolio managers from DWS, Federated, and PIMCO.
All three managers agreed that “a deal has to get done” and most likely will be completed in the last minute. Not having one would be political suicide for both parties and seriously impact their re-election chances. The majority of Americans are beyond politics on this topic and want them to do their jobs. So, the chances of a deal not getting done are negligible. In fact, PIMCO put the odds 95/5 that a deal of some variety will get done. Most likely, the deal will be short-term in nature with a $2.4 trillion debt ceiling increase, and we’ll continue to see short-term solutions until after the 2012 elections.
If we don’t get an agreement, both the bond and stock markets would be rocked. However, the pressure to get a resolution would be so great that one would be completed soon after and any fall in the markets would see a spring back after a deal was completed. So, we don’t think it prudent to make any structural moves that might impact you negatively should we be out of the market if that “spring back” occurred.
As always, we are looking out for your best interests and wanted to give you our insights in these very difficult and confusing times. Hang in there with all of this negatively….we will make sense of it all for you.