On Debt Ceiling Crisis, Focus on Opportunities

While we prefer to avoid commentary on politics, our clients, colleagues and friends have encouraged us to opine on the debt-ceiling debate currently taking place in D.C. Thanks to Paul Touchstone for his thoughts on this subject.

There is no way to predict the outcome of this political exercise, though we continue to err on the side of probabilities and believe that both sides will work something out in advance of the Aug. 2 deadline.

Short-term rates and spreads are typically early indicators of stress in the capital markets. At this time, they are showing little in the way of increased volatility or risk. Perhaps this is an indication that regardless of the outcome of the debate, the U.S. Treasury will pay interest and principal on time as they avoid an actual default on their debt obligations.

While the politicians act hysterical and the media creates a frenzy, investors would do well to maintain cooler heads and focus less on the short-term effects and instead on the longer-term opportunities that are prevalent. These opportunities may actually become cheaper in the days ahead, in which case we may be compelled to add to our positions.