What does debt ceiling relief look like on Wall Street? Stocks holding last week’s gains, gold rallying, and Treasury yields dropping. Meanwhile, crude oil and the dollar are modestly weaker.
On the news front...
A debt deal is secured...well, almost! President Joe Biden and House Speaker Kevin McCarthy agreed to suspend the debt ceiling until Jan. 1, 2025 during weekend negotiations. Their deal caps federal spending for the next two years, ensuring we won’t have to go through another round of debt drama until after the next election cycle.
Restive representatives in both parties could still scuttle the deal in the House or Senate, so technically it’s not a lock until key votes are held this week. But Wall Street seems fairly confident the deal will get done. We’re seeing longer-term Treasuries rally in price, sending yields lower. Plus, short-term bill yields are dropping back into the low-5% range after topping 7% last week.
China has been a key driver of global economic growth for several years. But the country is now entering a new era of slower growth, one where GDP will likely expand 2% to 3% annually instead of 6% to 8%, according to this revealing Wall Street Journal story. Deteriorating relations with the West, a widespread real estate bust, and an aging population are key drivers of the transition.
Finally, Moscow came under attack from multiple drones in the last 24 hours. A handful of apartment buildings were damaged in the strike, the first to hit a residential region of Russia’s capital city. Ukrainian cities have been targeted by missiles and drones since the start of the war.