US: A default and subsequent Fed intervention would undermine the USD, Gold to gain market favor – UBS
|We are just weeks away from hitting the limit for US government borrowing, and a compromise in Congress has yet to be reached. Economists at UBS analyze the market impact in the event of no agreement.
What happens if the US debt ceiling is not raised?
“In terms of the market impact, we estimate the S&P 500 could fall quickly by more than 10% in this scenario as markets reprice the growth outlook and heightened systemic risks, though it could recover a meaningful portion of this oss if market turmoil pressures Congress into reaching agreement.”
“We think longer-dated Treasury bonds could sell off initially in response to any default, but we would also then expect them to rally back as markets price a heightened probability of recession.”
“A default and subsequent Fed intervention would likely undermine the value of the US Dollar, and we would expect Gold to gain market favor, as it has in previous debt ceiling stalemates.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.