Analysis of Debt Ceiling Debate

July 29, 2011 | Doug Oest, CAIA, Managing Partner, Greg Leonberger, FSA, EA, MAAA, FCA, Director of Research, Managing Partner

As the August 2nd deadline for a resolution to the debt ceiling debate quickly approaches, many questions are emerging about the ramifications for investors in the U.S. truly does default on its debt obligations. Not surprisingly, opinions differ on what the bottom line impact will be for financial markets and investors. Unfortunately, the only consensus among market pundits is that there is no consensus. It should be noted that the current situation is extremely fluid, so portions of this newsletter may be out of date by the time it is read.

The following analysis tackles the biggest questions debated by analysts and market participants:

• Will the U.S. Treasury default on its debt?
• Will a major rating agency downgrade the U.S. credit rating?
• What impact could a downgrade have on the U.S. fixed income market? U.S. equity? Non-U.S. equity?

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