due to the political brinkmanship that was sparked by a debt ceiling crisis.
"While we expect that the debt limit will be adjusted again, we see a significant risk of financial market volatility between now andThese are the four potential outcomes of the current US debt ceiling showdown in Congress, according to the note.In this most dire scenario, the US government would partially default on its debt due to political brinkmanship between Democrats and Republicans.
Because of a partial default, US debt would be downgraded by credit agencies, which would lead to investors demanding a higher risk premium. There would be a decline in confidence and spending among consumers, and the US economy would fall into a recession. This is the worst possible scenario for the stock market.In this scenario, a debt default would be fully averted thanks to the Republicans giving up on its spending cut demands at the last minute.
"We favor the outcome of a temporary debt ceiling suspension either for a brief period of time or until September when Congress will be debating the budget for the next fiscal year. The government has done this repeatedly, including seven times between 2013 and 2019," NDR said.
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