Dow Jones: why it is so important to reach (as soon as possible) an agreement on the debt ceiling

Five consecutive days down, a stock market week is what has marked DOW JONES Ind Average in the last days, with several problems on the table, but the underlying one, above all, is called the lack of agreement on the debt ceiling. We all look at the deadline to reach it, next June 1, but the market and its precedents tell us something else clearly different: the economic suffering due to the political struggle is more than high.

And it is that, in addition, for many, Circumstances very similar to those that occurred in 2011 are being created, when the two parties reached a last-minute agreement. Finally, Wall Street took a little over two months to recover from the supposed setback, as is now the case with values ​​clearly falling throughout the weekespecially after waiting for an agreement between the White House and Congress last Monday, and that it did not occur.

Another of the fateful consequences occurred in August of that year, when the credit rating agency S&P lowered the rating of the United States for the first time in its history and the subsequent bearish drift of the indicators, including the Dow Jones. Now, as we will see shortly, it is Fitch who gives the alert.

In its price chart we see that Dow Jones moves with weekly cuts of more than 2%, which advance in the month above 1.5% and whose quarterly baggage barely reaches negative 0.74%. Also in the year, it returns to the red numbers with cuts that slightly exceed 1% for the American selective. With the indicator already below, clearly, the level of 33,000 points.

Dow Jones annual evolution of the indicator

That touchstone that S&P put on the table in July 2011 with the downgrade of its perspective is the one that another rating agency, in this case Fitch, has raised the alarm: vigilance or perspective as we say in Spain negative for the American AAA as first step to a possible downgrade of your credit rating in case legislators do not agree to de facto increase the Treasury’s availability to borrow money and avoid running out of it.

This contributes to the immediate tension of the debt and of course of the equities as we are verifying. A notice to mariners of important consequences to reach an agreement before the so-called date X, that of June 1.

Regarding values, the week has been marked because only three values ​​have been positive: Chevron, Cisco Systems and Unitedhealth Gro with gains that have slightly exceeded 2%. And while in the month, it is the technological values ​​that continue to push the indicator up, thanks to Salesforce, Microsoft, Apple and Cisco Systems.

Chevron annual stock listing

Already in the year, the “Nasdaq” stand out again. Technological values ​​such as Salesforce with advances of 57%, those of Apple, of 32% or those of Microsoft of 30% since last January. The first value outside the sector is McDonald’s, which advances 8.5% in the year.

As if the concerns of the market were few, the possibility that the Fed pause does not become indefiniteand the possibility is gaining weight that, after a new rise in June and the pause in July, in August, depending on how the economic data evolves, the Federal Reserve is once again considering a rise in rates, which would break the early illusions of a drop in the price of American money in the second part of the year.

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