Stock traders have remained surprisingly unphased amid ongoing talks in Congress regarding raising the U.S. debt ceiling. Depending on the outcome of the talks, the U.S. may be unable to pay its bills by the June 1 deadline.
Treasury Secretary Janet Yellen confirmed on Friday that the U.S. will “have to default on some obligation” should Congress not raise the existing debt limit. Still, Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors, is convinced that investors have already been desensitized to such uncertainty.
It’s “like kicking a man when he’s already down,” Phillips remarked. “Depending on what happens with the debt ceiling, we could see additional fiscal drag in addition to monetary policy. That will eventually need to be reflected in stock valuations because it’s not showing up yet.”
Price swing expectations for stocks most sensitive to a government default remain near a two-year low. The Cboe Volatility Index, the measure of market risk, fell to a 17 level.