Consumer confidence among consumers declined in September to a five-month low. University of Michigan’s final index of sentiment decreased to 77.5 from an August reading of 82.1. This paints a picture of a consumer increasingly affected by rising rates and soaring gas prices amid stagnant incomes. This is a  significant risk to the downside for US Equities.

Oct. 1 is a new budget year in the U.S. and requires Congress to pass a spending bill to allow agencies to stay open. Oct. 17 Congress votes to increase the government’s $16.7-trillion debt ceiling to avoid a first-ever default on its payments. United States Presidents have a long history of seeking higher debt limits as spending outpaces tax revenue. Republicans use debt ceiling as leverage against Obamacare trying to strip funding from the health-care program. This time, Obama says he’s not budging; betting Republicans blink to avoid a government shutdown or default. There will be no bargaining by the President. A partial government shutdown would keep thousands of federal workers off the job and close national parks. If the U.S. defaults, the government would not be able to pay interest obligations, pension benefits, and payments to thousands of contractors, and salaries for the military. For the rest of the world, a default in the U.S. would have inevitable influence worldwide. “Financial markets will be roiled, stock prices will decline, it would be a severe recession and there literally is no policy response to it … It’ll be bedlam. It’ll be a mess.” A stopgap spending bill would keep the government running until Nov. 15. 

Sincerely, Philip Magnoli – My friends call me Don Filippo- The FX Specialist. 416-362-1300