Regions

Stock markets hunker down for incoming volatility due to impasse

October 5
10:52 PM 2013

Rising turbulence is said to be expected in the US stock market as the budget impasse continues in Washington. This leaves investors worried about the issue of the debt ceiling, which is much more critical to the country's overall economic health compared to amendments in the health care law called 'Obamacare'.

The current budget deadlock had resulted in a government shutdown in the past four days, which is far longer than investors have expected. Despite stock markets closing at higher levels last Friday, the S&P 500 reported a decline for the week while the market's fear index, the CBOE Volatility Index, increased from 13.12 to 16.89 last September 20. While this is still at a low manageable levels, but indications show that many investors are beginning to shore up against the incoming stock volatility.

With the far greater issue of debt ceiling tied up to the healthcare budget problem, a continued obstinacy by the parties to resolve any law, be it for the healthcare or debt limts would result in default by the US on its current loans The debt limit as of the moment is at USD16.7 trillion.

The US Treasury had said the government would exhaust its borrowing authority until October 17. There was a clear assurance from House Speaker John Boehner that he would work to avoid a US debt default. Despite the pronouncements, the resolution to the deadlock is far from being achieved.

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