Tags: Blitzer | debt | Congress | default

S&P's Blitzer: 'Messy' Months Ahead as Congress Becomes Market's Worst Nightmare

By    |   Wednesday, 14 August 2013 08:24 AM

Shenanigans in Washington will be the biggest issue for the market over the next two months. Though volatility is almost certain, our worst nightmare — a debt default — is not likely to materialize, David Blitzer, S&P 500 Index committee chief, tells CNBC.

Beginning in September, the markets will be faced with "confluence of risky economic events that's unlike anything we can recall," according to Business Insider.

Those events include the Federal Reserve possibly starting to taper its asset purchases and nominating a replacement for Chairman Ben Bernanke. Meanwhile, in Washington, expect to see a fight over the federal budget that could lead to a government shutdown and a fight over the debt ceiling, Business Insider says.

Editor’s Note:
Will This Video Get Obama Fired? See the Evidence.

Some are warning that the markets should prepare for utter chaos. Blitzer doesn't think the events at the Fed warrant as much attention as those in Washington.

"The big issue is the debt ceiling, the budget deficit, the U.S. Congress. It's the whole fiscal policy side that's a huge problem," he tells CNBC.

"At this point it looks like a nasty standoff. Nobody wants to give anything. The clock is ticking on the debt ceiling," he adds.

Many investors have grown accustomed to Washington creating a near-crisis then implementing a knick-of-the-moment solution, and they aren't really concerned about the upcoming battles. But some warn they should be.

With the potential for dysfunction created by a combination of events, there is a real chance that the fall of 2013 will be more like the summer of 2011, Politico warns. That was a time when a near miss on the debt ceiling led to a U.S. debt downgrade, a huge sell-off in the stock market and a blow to the economy.

"There's going to be some pain that isn't being priced into market expectations," Isaac Boltansky, an analyst at Compass Point Research & Trading, tells Politico. "Right now the markets are doing well, but I don't think it's pricing in this impending battle."

Blitzer foresees a showdown as a lawmakers show off, but he's not looking for a crisis for the markets or the nation.

"I don't think we're going to default but I think we're going to have one these crazy 11th hour skirmishes. Everybody will decide the US Congress is even worse than their worst nightmare and the markets will get hit as a result," Blitzer tells CNBC.

"It's going to be a very messy September/October period," he admits.

But "we will come out the other side reasonably well," though we will feel "pretty silly in the middle of it."

Editor’s Note: Will This Video Get Obama Fired? See the Evidence.

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Shenanigans in Washington will be the biggest issue for the market over the next two months. Though volatility is almost certain, our worst nightmare — a debt default — is not likely to materialize, David Blitzer, S&P 500 Index committee chief, tells CNBC.
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2013-24-14
Wednesday, 14 August 2013 08:24 AM
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