The debt ceiling drama is dragging on as the temperature in the room rises. Stocks continue to struggle, but stick to the plan and do not make emotional decisions, advises Kenny Polcari, managing partner of Kace Capital Advisors LLC.
The Dems are offering to freeze spending at CURRENT levels, while the GOP wants to cut them to 2022 levels. So, the first question that comes to mind is what we are really talking about?
In 2022, we apparently spent $6.7 trillion dollars when we only took in $4.89 trillion, resulting in a $1.375 deficit. CURRENT CBO projections for 2023 already show a $1.5 Trillion deficit and it’s only June. That is up over the February estimate of $1.4 trillion and is already above what we spent in 2022.
So, you see how this keeps creeping up. What are we really freezing? We have already pierced the 2022 deficit and will clearly end up with a bigger deficit by the time the New Year comes. What number are the Dems proposing to spend? They want to hold spending at current 2023 levels and we don’t even know what those levels are. Now do you understand how ridiculous this is?
Apparently, Fitch Ratings sees the ridiculousness (or at least they are trying to beat Moody’s and S&P to the punch). Wednesday night they put the US credit rating at risk of a downgrade because of the antics taking place in D.C., saying that they are concerned that an agreement will not be reached and that the US will not be able to pay its bills. BUT they do hedge this bet by saying that ‘while they expect a resolution there is a risk that they won’t!’
Now just to be clear: Of the three main ratings agencies, Fitch is NOT considered to be the Valedictorian of the group. So, what does their credit watch really mean? Absolutely nothing other than grabbing the headlines for the day and having the media discuss it. But I do expect that both Moody’s and S&P should be opining at any moment just so that they look like they are paying attention.
The warning does create more angst for the markets while attempting to put pressure on Congress though. But I’m not even sure how that is working because guess what? Congressmen/women are leaving DC in droves. Why? Because it’s Memorial Day weekend and they need to get home to celebrate!
Debt ceiling? Don’t be ridiculous. They have a BBQ to get to. The crisis will be here when we return on June 5. See that? They don’t seem to be too concerned about a June 1 blowup.
My advice: This too shall pass. Know what you own and why you own it. Continue to DCA (Dollar Cost Average) on a monthly basis and re-invest your dividends until you need them as income. And eliminate the noise.