Low-level anxiety meets broad complacency ahead of non-movement from Congress & The White House relative to a temporary Debt Ceiling raising.

Freepik

The majority continued to expect the 'debt ceiling standoff' to result in a huge market decline, which we don't automatically embrace as an outcome. Sure, if we have a series of further defaults and bank failures, you get the alternative of a dire series of cascading events. I see that as overly negative.

Now, should there 'actually' be a 'disaster', it won't be quite the catastrophe as outlined by Secretary Yellen yesterday, but rather 'how deep and long' it such an event would be. When the last plunge happened in 2011 (similar situation) it was resolved in a couple weeks. More pain than resolving it in-advance, or having the President supersede Congress in some last-ditch way.

But while in-theory it might go over the cliff, I suspect it wouldn't stay in such suspended animation for long. I suspect debating credit issues and what the Fed does is irrelevant just now, as obviously the Fed knows such outcomes do loom, especially 'if' the market pummeling that so many look for ..happens.

In-sum: 

Ultimately there will be a market shakeout, and May is a typical time for it. However, the bears haven't gotten it in S&P 'yet', partially as it looks way past the sound effects (debt) of the moment, to the AI-driven future upside.

So sure, we can't say the debt issue can't touch-up something disorderly, but the word 'duration' matters, since (as history shows) such purges tend to be a temporary phenomenon and then you get a more dramatic upward surge.

We will get CPI and that matters the most to the start of Wednesday's market, presumably.

As to the 'Debt Ceiling', to no surprise there was 'no new movement' in debt limit talks, with a willingness to continue over the next two weeks. Intransigent stubbornness is not something I can assess 'for now', it may be posturing in a sense, with some sort of deal still to be cobbled over the next two weeks.

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