NEW YORK — The Wall Street financial markets have remained relatively stable throughout the protracted debate in Washington over extending the $16.7- trillion government borrowing limit. However, now that a last minute agreement has been reached to avert an unprecedented national debt default, some investors are still anxious about how this recent crisis will affect America's financial standing in the long term.
Stocks surged higher on Wednesday after Senate leaders reached a deal to raise the government debt ceiling. The news came one day before the U.S. Treasury said it could run out of ways to avoid default on its debt. Many investors say they have not been surprised by either the political brinkmanship on display in Washington or the announcement of last minute deals.
Ken Williams, a stockbroker with Blackwall Capital Markets, said it is just how business gets done in Washington these days.
“Unfortunately we'll hit our rocks and have our problems and scare everybody. It's just like a roller coaster, aahh, oohh, eehh, but in the end, guess what? It'll come out nice and smooth and you'll get off and you'll look behind you and say, 'what a ride,'” said Williams.
Offering an alternative view is Gennadiy Goldberg, a strategist with TD Securities, who feels that even the threat of a default drove some investors to pull money from short-term money markets. Goldberg is worried the Congressional drama could also undermine long term international confidence in U.S. currency markets and the dollar.
“The Treasuries [bills] are used as kind of a risk-free base rate for things. So obviously when your risk-free base is no longer risk-free, that will throw everything up in the air and have people reconsider how they see the U.S. dollar as a global reserve currency, how they see Treasuries as the risk-free assets,” explained Goldberg.
Goldberg also feels that not only has the U.S. financial reputation been tarnished, but in addition the national debt will actually increase because of the government shutdown.
“There is no reason to assume that this would have actually saved us any money. So the irony is that by shutting down the government, we're actually going to be paying more because you have to pay back the workers, you have to pay back your debt and essentially it will cost you more in the end,” said Goldberg.
Even though Wall Street investors were prepared for a last-minute deal, Goldberg feels political stand-offs in Washington are likely to make the markets more volatile in the future.