Global investors are gaming out how a tentative deal to raise the United States debt ceiling could ripple through markets, as lawmakers face a difficult path to pass the agreement through Congress before the June 5 deadline.
by the White House and House Republicans late Saturday would avert a catastrophic U.S. default and boost overall appetite for risk while also buoying some of the sectors that have been left behind in this year’s tech-led rally, such as cyclical stocks and small caps, investors said.
The deal suspends the debt ceiling until January 2025 in exchange for caps on spending and cuts in government programs. Narrow margins in the House and Senate mean that moderates from both sides will have toU.S. Treasury Secretary Janet Yellen on Friday set a deadline for raising the federal debt limit, saying the government would default if Congress does not increase the debt ceiling by June 5.Since the $24.3 trillion U.S.
Stuart Kaiser, head of equity trading strategy at Citi, said a deal could be a “modest positive” for equity markets at the index level but could provide a greater boost for sectors that have lagged this year, including shares of companies with weaker balance sheets and small-cap stocks. Meanwhile, the brinkmanship in Washington could also prompt rating agencies to downgrade U.S. debt. Ratings agency Fitch late Wednesday put the United States on credit watch for a possible downgrade while DBRS Morningstar on Thursday placed U.S. credit ratings under review with "negative implications."
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