Back to fear the risk of default in the United States after the statements of Janet Yellen. What to expect from the performance of the S&P500 index?
As has often happened in the last ten years, many foreigners have returned to talk about US debt. Washington is apparently struggling to repay its creditors by around $31 trillion. The doubt once again concerns the agreement between the government and Congress regarding the increase in the debt ceiling of the United States.
The issue, although highly debated, has taken second place to other topics of the moment. This is because the issue of the "debt ceiling" in the past has always been resolved, despite the debates, in the same way: by raising the ceiling. And this is precisely how the mountain of US debt has been created over the years. But although it has almost become a banality or a simple "seasonal convention", the more pessimistic analysts remain of the opinion that the debt "bomb" will have to explode sooner or later. In 2022 the debt-to-GDP ratio exceeded 120%, values that in the past were only reached during World War II.
This isn’t the first time we’ve heard of US debt crisis but this time may be different.
What impact of a US debt default on the markets?
President Biden invited Kevin McCarthy, speaker of the House of Representatives, to the White House on May 9 to try to find a solution to the problem. The economic fate of the United States and the rest of the funding economies could depend on this meeting.
This is because not only US finances but also those of financially connected countries are at risk.
In essence, the default of the United States would mark an epochal change: the US Treasuries are in fact objectively considered among the most "secure" instruments in circulation and therefore most used by institutions and governments to cover the "costs" of its capital.
It would therefore be a dangerously damaging event for the global economy, likely resulting in a drastic reduction in equity prices in the markets of US-related economies. For this reason, many consider it highly unlikely that a legislative agreement will not be reached in the United States.
S&P500: technical analysis
From a technical point of view, the markets do not appear to be pricing in the risk of a US default at all. The price of the S&P500 has strongly exceeded 4,000 points and is close to the February highs. The next technical stumbling block is 4,200 points, a value that according to some experts could try to break as early as this week.
The dates to be monitored carefully are precisely 9 May and the beginning of month of June, a period in which, according to Treasury Secretary Janet Yellen, a debt default could already be risked.
Original article published on Money.it Italy 2023-05-03 15:50:00. Original title: Rischio default: gli USA siedono su debito di $31.000 miliardi. Cosa può succedere?
