Recession Looms If Treasury Uses Tools to Prevent a Default (Bloomberg)
The U.S. Treasury can avoid a debt default even if Congress fails to raise the government’s $16.7 trillion borrowing limit by Oct. 17 but it would put the United States on a path toward recession. Economists at Goldman Sachs Group Inc., IHS Inc. (IHS) and BNP Paribas SA said they expect the Treasury to husband the tax money it collects to make sure it can meet interest payments on the nation’s debt. Other obligations, from salaries of government workers to payments to defense contractors, would face the ax. The result would be $175 billion less in government spending during November alone, said Goldman’s Alec Phillips. “The cutting would be so huge it would put the U.S. back into recession,” said Jim O’Neill, former chairman of Goldman Sachs Asset Management. Yikes!
Markets finally cracked yesterday with the Dow Jones falling 2.73% and the S&P 500 tumbling 2.33% for the week. Reflecting the newfound strength in global markets, the MCSI Emerging Markets Index ended the week down only 0.53%.
As a result, many of your Alpha Investor Letter portfolio positions dropped below their 50-day moving averages and moved to a HOLD.
The list of new HOLDs is long, and includes Visa Inc. (V), iShares MSCI Singapore Small Cap Fund (EWSS), Google Inc. (GOOG),
Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
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Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. Since 2010, Hilary's financial publications have provided stock analysis and investment advice to her subscribers: