Next Week's Market: Beware the Continuing Resolution Bounce
Nine observations about how the situation in D.C. is shaping up.
I was chatting with some of those contacts this week and here is how the situation is shaping up:
- Weekend talk shows are going to be very confrontational and full of posturing, with very little talk of compromise.
- The Senate will pass the continuing resolution (CR) legislation without any defunding of the PPACA ("Obamacare").
- Monday's market will almost certainly open, and very probably close, without a vote on a CR by the House.
- Odds are pretty much even whether the CR is passed on Monday or some time on Tuesday, which technically would cause a government shutdown -- but only briefly. Therefore, there's a chance we could open on Tuesday without a CR vote. If the market craters on Monday, I'd expect the House to vote late on Monday night to prevent a repeat on Tuesday morning.
- It's likely whatever the Senate passes, the House will pass -- after lots of protestation.
- The CR is only the appetizer. Both Democratic and Republican polling shows a difference in public opinion between a "government shutdown" and not raising the "debt ceiling" in terms of holding those separate votes "hostage" to political demands. You and I can agree that makes no sense, but that's what the polling indicates.
- Based on these polling differences, the Tea Party strategy is to "compromise" on the CR and then hold fast on the debt ceiling. The White House suggests the debt ceiling will be hit on October 17. The Office of Management and Budget (OMB) says it might be perhaps a little later.
- While there is a rising tide within the GOP to stand fast against their House minority coalition partner (Tea Party), those riding that tide are still in the minority. That makes it unlikely that Speaker Boehner will choose to throw his coalition partners under the bus soon enough to avoid the US going at least a day or two beyond the debt ceiling deadline.
- There is a good chance the CR and perhaps the debt ceiling extensions would not go past November, setting up a repeat of this process in another month.
Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter