Happy Saturday, folks. I’m Phil Rosen, it’s good to see you today.
As we’ve talked about all week, there’s a looming debt-ceiling deadline right around the corner, and unless lawmakers get their act together, financial markets could soon be in for a world of pain.
Today I’m eager to share my conversation with a top personal finance and economy expert from Bankrate.
Mark Hamrick is senior economic analyst for Bankrate. This conversation has been lightly edited for length and clarity.
Phil Rosen: How should investors be positioning themselves as the debt-ceiling fiasco drags on, and a potential default nears?
Mark Hamrick: The problem with suggesting that someone make investment decisions that are unique to this experience requires them to do something that’s almost impossible, and that is they have to be right twice with the timing.
Investors have to be right on the timing of, essentially, getting out of the market or reducing exposure to certain assets, including equities, then they have to be right on the timing of when to get back in.
For most people, the best decision here is to take a long-term view.
If making a play around the debt ceiling is a no-go in your view, what should investors opt for instead?
MH: Maintaining best financial practices, including maintaining sufficient emergency savings. And high-yield savings accounts offer higher yields than they have in a decade, so those are attractive too.
What impact could a potential US default have on the US dollar?
MH: With respect to the breach we’re hypothesizing about, you can imagine if the full faith and credit of the US is undermined, there would be a related impact on the credibility of the dollar.
No one is reasonably predicting the dollar to stop being the world’s reserve currency anytime soon. But thinking about factors that impact the strength of the dollar, like the economy and interest rates, you can imagine things would become more uncertain and volatile with respect to that asset.
What do you think of Hamrick’s outlook? Are you rethinking your investments to adjust for the possibility of a US default? Let me know.
And here are the top stories from markets this week:
1. Gold prices are climbing thanks to de-dollarization and banking uncertainty. The precious metal has seen a run-up since the collapse of Silicon Valley Bank in March, and hovered near an all-time high this week. With turmoil weighing on a slew of other assets, investors have flocked to gold.
2. The debt-ceiling crisis is coming at the “worst possible time,” according to Chicago Fed president Austan Goolsbee. Even a last-second deal could cause doubt in US Treasurys, and the economy’s already going through tumult as it is. See his full remarks.
3. Bank of America recommended this batch of healthcare stocks to capitalize on in the current landscape. Strategists explained what they look for when hunting for successful names in the sector — and concluded that these 16 picks have a collective 50% upside.
4. Charlie Munger pockets $70,000 a year from a $1,000 investment he made in 1962. Warren Buffett’s right-hand-man is a legendary investor in his own right, and he’s been reaping the rewards of a bet he made decades ago.
5. The chairman of Evercore said a recession will unfold this summer and last through the middle of 2024. The market veteran said he doesn’t expect it to get as bad as 2008, but thanks to the Fed’s aggressive policy, a downturn looks inevitable.
6. The FDIC proposed a fee on banks to refill the $16 billion hole from covering depositors at SVB and Signature Bank. Under the plan, the country’s biggest banks would cover 95% of the cost. Read more.
7. Homeowners are “quiet quitting” as low inventory and high mortgage rates keep a key market participant sidelined. New listings are down more than 20% from a year ago, and current homeowners looking to upgrade don’t want to give up the lower rate they secured last year. That has a dual impact: each owner that postpones looking for a new house also marks one less seller on the market.
8. Morgan Stanley’s chief investment officer anticipates stocks to drop as the economy enters a recession. A downturn would weigh on equities, but so would a decision from the Fed to keep interest rates higher for longer than anticipated. Either way, corporate earnings look set up for pain.
9. Credit Suisse’s chief US economist said home prices look set to fall another 5% to 10%. The gridlock between buyers and sellers, he explained, will prevent both appreciation and a larger crash. He called it a “long recession of price.”
10. UBS shared its top takeaways for investors from Berkshire Hathaway’s legendary shareholder meeting. Buffett talked about his succession plans, shot down a potential purchase, and ultimately left strategists calling it the “best annual meeting in years.”
Edited by Max Adams (@maxradams) in New York.
Read the original article on Business Insider