Now that House Republicans passed the Limit, Save, Grow Act of 2023, which proposes to raise the nation’s $31.4 trillion borrowing limit in exchange for deep government spending cuts, we have the following thoughts.
  1. We continue to believe a deal is reached in time to avoid a technical default and view the passage of the House bill as the first step toward reaching a deal. Despite previous dire predictions about a default, the debt ceiling has always been raised and Republican Senate Minority Leader Mitch McConnell and House Speaker Kevin McCarthy have both reiterated that a default is simply unacceptable and that it is not going to happen.

  2. The House bill raises the debt limit until the earlier of March 31, 2024, or when debt has increased by $1.5 trillion. Most of the other policies in the bill are likely to be dropped from it before a debt-limit increase can pass the Democratically controlled Senate, and the eventual debt-limit increase is likely to last until after the November 2024 election, so few of the details in this bill reflect the likely outcome.

  3. However, passing a debt-limit bill with near-unanimous Republican support (four Republicans voted against) is likely to put weight behind Republican insistence that the White House and congressional Democrats engage in negotiations on policy changes to accompany a debt-limit increase.

  4. In the unlikely scenario that a deal is not reached in time and the Treasury is forced to prioritize payments, millions of Americans would be directly affected (not receiving their Social Security checks, not being paid for services rendered, employees not getting paid, etc.). The political pressure to reach a deal will be immense, so even if Congress goes past the deadline, a deal is likely to be reached within hours or days of checks not going out. Importantly, bondholders would be prioritized and would get paid in any scenario—avoiding a worse-case outcome for financial markets.

  5. Our view continues to be that panicking out of the equity market carries more risk than remaining in a portfolio consistent with an individual’s well-reasoned asset allocation. If a less-exposed posture is desirable, lowering overall portfolio beta while possibly adding to cash might be employed.

  6. Minimally, this might be a good time to review an asset allocation to be certain it is consistent with intermediate and longer-term objectives. It is not a time to make major and drastic news (noise)- induced changes.
This report is provided for informational and educational purposes only and shall in no event be construed as an offer to sell or a solicitation of an offer to buy any securities or a recommendation for any strategy or to buy, sell, or hold any product. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. Employees of Janney Montgomery Scott LLC or its affiliates may, at times, release written or oral commentary, technical analysis, or trading strategies that differ from the opinions expressed here. The information described herein is taken from sources which we believe to be reliable, but the accuracy and completeness of such information is not guaranteed by us. The opinions expressed herein may be given only such weight as opinions warrant. This Firm, its officers, directors, employees, or members of their families may have positions in the securities mentioned and may make purchases or sales of such securities from time to time in the open market or otherwise and may sell to or buy from customers such securities on a principal basis. This report is the intellectual property of Janney Montgomery Scott LLC (Janney) and may not be reproduced, distributed, or published by any person for any purpose without Janney’s prior written consent. This presentation has been prepared by Janney Investment Strategy Group (ISG) and is to be used for informational purposes only. In no event should it be construed as a solicitation or offer to purchase or sell a security. Past performance is no guarantee of future performance and future returns are not guaranteed. There are risks associated with investing in stocks such as a loss of original capital or a decrease in the value of your investment. For additional information or questions, please consult with your Financial Advisor.

About the author

For more information about Janney, please see Janney’s Relationship Summary (Form CRS) on which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest.

To learn about the professional background, business practices, and conduct of FINRA member firms or their financial professionals, visit FINRA’s BrokerCheck website: