DC Vs. Wall Street

All weekend, there were worries that the debt ceiling standoff would lead to a major sell-off on Monday. So far, the market is down but not nearly as much as was feared.

If the markets get even more nervous, that would probably be a catalyst for the folks in Washington to reach a deal. A similar reaction happened when Congress initially shot down the first TARP proposal on September 29, 2008 (also a Monday). The Dow plunged 777 points. The bill passed a few days later. In other words, Wall Street’s reaction to Congressional action can act like a virtual veto.

I often see articles that show how the market has performed under different presidents. I think they get the relationship backward. It assumes the politicians are like players on the field on the markets are the scoreboard. It’s more interesting to see the markets as the players and what the policy makers do as reflecting the changes in the markets.

I haven’t commented much on the political standoff because I’ve assumed that some sort of deal will be reached once all the grandstanding is done. I honestly don’t know what will happen but I see that the financial sector is especially weak today. The market opened lower today, but it’s slowly been climbing higher.

Posted by on July 25th, 2011 at 10:54 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.