Now the question is answered–what happens if US debt gets downgraded? How will the stock market react? What about rates. Here is the scorecard:
Rates went down –they were supposed to go up, increasing borrowing costs–but Treasuries are still the instrument of safety. Another country gets stronger than us–then maybe we have another result.
Stock market—pretty much a massacre. Down 5% to 7% for the day on Monday.
Gold. Gold seems to go up no matter what happens. Today, gold was soaring. Does this remind you of previous bubbles?
Oil. Down sharply. Oil is down 20% over a two-week period. Pretty signficant.
Of course, this is only one day. But it was a heck of a busy day. Never a dull moment when the Congress gets involved. Perhaps all this may spur our politicians to get back to the table and do what they need to do in order to send a strong signal to the world.
On the other hand, what a great opportunity to refinance or buy a home. Rates were low before, but now they are unbelievable.
Tomorrow the Fed Meets. I would love to be a fly on the wall during this meeting.