Looming debt ceiling deadline pushing some U.S. fund managers to cash

Reuters/David Randall/09-01-17

A potential standoff over the U.S. federal debt ceiling is raising alarm bells among fund managers who fear a repeat of 2011 when a protracted showdown over increasing the government’s borrowing limit and subsequent downgrade of U.S. credit quality led to a more than 15 percent slump in the S&P 500 stock index.

U.S. investors are raising cash and buying protection, bracing for a messy fight ahead of the Treasury Department’s Sept. 29 deadline to raise the debt limit, a legal cap on how much the U.S. government is allowed to borrow.

Failure to increase the debt ceiling could lead to a recession and prompt the first significant sell-off of the Trump administration. The benchmark S&P 500 has not fallen by 5 percent or more in over a year, the longest streak without such a decline in more than 20 years.

PG View: Given the current trends in the dollar and gold, I’d opt for the latter as my preferred safe-haven . . .

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