My Thoughts

May 17, 2023

The Debt Talks on Capitol Hill is the topic of today's discussion. Each party points their fingers at each other, but we all know at the end of the day, an agreement will be reached.

Here is what we know so far. The Republican controlled House of Representatives have passed a bill to raise the debt limit while also calling upon federal spending cuts. The Senate, controlled by New York Senator Chuck Schumer, won’t bring the House bill to the floor. President Biden said that he won’t negotiate and that spending cuts are off the table.

What is really happening is that President Biden and Speaker of the House Kevin McCarthy met once last week and are talking using back channels, including Congressional staffs, while telling everyone the other party is going to force the US Government into default. A bunch of political smoke signals are sent up intended on trying to grab the upper hand in the media.

The truthh is the debt limit will be raised, some budget cuts will be agreed to, and we will revisit this again in a few more months or years.

I do expect a dip in equities AFTER the debt ceiling has been raised (thinking sell the news).

Also, the FOMC has signaled that they are likely to pause raising interest rates. The pause could last for years, or may result in the cutting of interest rates even sooner. Both a pause and rate cut will help dividend stocks, however I believe a rate cut would trigger an initial sell off in the markets (what did the fed unexpectedly break?). 

Dividend stocks have had a challenging year due to two factors: bank problems and rising interest rates.  After a spectacular first quarter, Growth stocks experienced some backing and filling in April and are rallying again in May.

That's all for now,

Best regards,