The dog that didn’t bark
Despite predictions and dire warnings after the collapse of debt ceiling negotiations between Obama and Boehner on Friday, there was no comparable collapse of the world or U. S. markets on Monday morning.
The Asian markets, which lead off the days trading and were looked to for a signal of how investors would react, were slightly down but within a normal days trading. Shangai Composite was down 3%, but primarily in reaction to the Chinese high speed train crash and sell-off of railway stocks. Real events apparently affect markets more than imaginery ones.
U. S. Stock futures were also slightly down with Dow Jones Industrial, S & P 500 and Nasdaq futures all dropping less than 1% ahead of the opening bell today. The big news here was a sense of confidence that the United States would not default, with a greater fear that the bond rating would be lowered because of failure to deal with the long-term debt problem. Apparently future traders have arrived at the same conclusion as House Republicans, which is that the debt is more important than default.
The expected across-the-board decline of stocks at the opening bell today simply did not take place. There were slight declines, but no major sell-offs. The Dow dropped 100 points at the opening, but then rallied. S & P 500 and Nasdaq had smaller declines at the opening before rallying. In all the drop was less than 1% of value. Certainly not the collapse some were anticipating. Investors apparently have more confidence in our government than do Obama and Democrats. Of course, Obama was probably hoping for a financial meltdown in order to strengthen his hand. The lack of one should instill renewed courage in Speaker Boehner to stay the course.
As I write this at 10 a.m., 30 minutes into opening, the declines are less than2/3 rds of a point–and not outside the normal range. Certainly, this could all change by the time you are reading this post. The rule of a market panic is that we don’t know there is going to be one until it happens. But, it didn’t happen when the markets opened Monday morning. And that’s good news for conservatives.