The “anxiety list” we have talked about in recent months has become more pronounced in recent days, with a sharp sell-off in stocks markets around the world. At the same time, scared money has flowed into U.S. Treasury securities, pushing interest rates sharply lower versus levels of just a few weeks ago.
We had suggested last week that the chance of a default onU.S.government debt was extremely low and that the debt ceiling would by increased. Still, the agreement reached in Washington DC to avoid default and boost the debt ceiling was one of those “kissing your sister” events…a mix of good and mostly bad.
The debt ceiling agreement “kicks the can down the road” as much as anything else. However, the fact that we are now more focused on the need to reduce growth rates of long-term government spending and trim future budget deficits is healthy. Meanwhile, our lack of confidence in the Administration and the Congress only grows.
Rising anxiety about spreading debt problems in Europe, combined with weak U.S.economic performance, have contributed to a painful stock market this week and last. Tomorrow’s jobs report will be a key as to whether stock market weakness continues and whether the chances of a new U.S.recession are rising. The sharp decline in oil prices of recent days will help consumers.
Revisions to U.S. economic data of the past seven years released late last week by the U.S. Commerce Department included news that the Great Recession was worse that we had previously known, while the recovery has been weaker. Significant downward revisions to U.S.economic data of the past six months have returned the recession option to radar screens.