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Is MM concerned by the US Debt Ceiling issue?

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    Is MM concerned by the US Debt Ceiling issue?

    Hi MM, In the US the Republican controlled lower house is threatening to block the extension of the debt ceiling which, I understand, will 'shut down' the US economy and create chaos which those in control thrive on so many do not see this as an idle threat. There has been little to no commentary on the effect to Australian ASX and any 'likely' way to manage the situation. What are your thoughts? Some US commentators are advising to "have plenty of cash" on hand! Cheers John

    Answer

    Hi John,

    A similar situation unfolded in 2011 which resulted in the ASX200 tumbling over 15% in less than 2-weeks before recovering strongly however that was a left field event, this time around lots of people are talking about pending debt ceiling volatility etc thus we believe the likelihood of such moves is reduced although obviously it cannot be ruled out.

    At MM we are looking to buy weakness and sell strength through 2023 hence we would welcome such volatility, especially if we have relatively high cash levels from selling strength – we want to remain flexible and buy dips of which there’s likely to be 1 or 2 in 2023, we will evaluate the reasoning & risks of such opportunities as they unfold.

    Also, its important to remember if we worried too much about every potential bearish market scenario we would never buy but over time stocks have proven themselves an excellent investment vehicle.

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