Week of October 4

For this week: October Market Commentary, Why the U.S. Debt Ceiling Matters, and a Hack for the Debt Ceiling - Mint a Trillion Dollar Coin

Monthly Market Commentary: The Rotation Begins

I continue to be a fan of the Chief Investment Office at Merrill Lynch (former colleagues of mine from ML Alternative Investments) and their macro research. Below is an excerpt from their October 2021 Viewpoint report:

In Brief:

Leading economic indicators suggest cyclical momentum is picking back up as the most recent coronavirus wave eases. The macro backdrop continues to support cyclical, reflationary positioning. We believe this is a positive backdrop for Equities.
The U.S. remains our preferred equity region relative to the rest of the world, with stronger balance sheets on aggregate, robust economic growth prospects, and strong earnings revisions.
The Federal Reserve (Fed) indicated at its September Federal Open Market Committee (FOMC) meeting that tapering of asset purchases is likely to begin in November and finish toward the middle of next year.
We expect volatility to rise as financial conditions tighten as the Fed begins to taper and interest rates drift higher.

How the U.S. Debt Ceiling Works and Why It Matters

The U.S. Debt Ceiling is an anachronism. It’s a dumb law and the accompanying political brinksmanship has the potential to cause catastrophically bad consequences to your wallet and standard of living. James Benedict and Kate Davidson of The Wall Street Journal have made a nice guide to explain how the debt ceiling works and why this matters.

A Hack to Fix the Debt Ceiling - Mint a Trillion Dollar Coin

Every few years the self-inflicted crisis of the U.S Debt Ceiling emerges and Congress, at the last minute, raises the limit and kicks the can for a few years and we start all over again! How is the political class ever going to fix the brinksmanship that has emerged over the U.S. debt ceiling?

Some politicians (and serious scholars) think they've found a silver bullet for the impasse over the debt limit, except the bullet is made of platinum: Mint a $1 trillion coin and use that newly created currency to pay the country’s bills.

Here is a story by Calvin Woodward of CBS News that explains.