How does U.S. debt ceiling deal affect your investment portfolio?
Posted Aug 2, 2011 1:44 pm.
This article is more than 5 years old.
U.S. President Barack Obama has signed a bill raising the U.S. debt ceiling, averting a catastrophic default in debt payments. But it may not be enough to stave off a downgrade in that country’s credit rating.
What does that mean for your investment portfolio?
“One of the big things I think it does remove some of the near term uncertainty,” Steve Lingard, a senior portfolio manager with Franklin Templeton Investments tells 660News. “Markets do not like uncertainty.” (So) “short-term: positive.” (We) “still have the medium and long term problems that need to be addressed.”
However with economists saying the deal doesn’t do enough to reduce America’s deficit, and continued trouble in European markets, Lingard notes it’s more important than ever to ensure your portfolio is diverse, adding even the experts can’t guess which asset class will be the first to bounce back.
“There’s going to be a very uneven recovery,” he adds. “There’s going to be a lot of volatility. In that sense, it doesn’t make a lot of sense to stick your neck out in one asset class or the others.”
Lingard says the debt ceiling compromise by Democrats and Republicans doesn’t fix America’s underlying economic woes.
“The U.S. economy” (is) “driven by” (the) “consumer,” says Lingard. “If you don’t have good news on the job or income front, and bad news on the manufacturing front, you’re going to see the market sell off.”
Lingard says equity markets are down about one or two per cent at this point in the wake of the debt ceiling crisis. But he adds it would have been far worse if lawmakers hadn’t come to agreement on a deal.
