With President Obama and Speaker Boehner both making their claims to the American people last night on why their versions of the debt deal is the right one, it will be interesting to see how the markets react. While one’s natural reaction might be to expect a sell off, we don’t necessarily think that will be the case. Actually, we find reason to believe that yesterdays last ditch posturing efforts could be contrarian bullish for the markets.
Let’s review quickly what a politicians number 1 one concern in, to get re-elected. Sadly it is no longer about doing what is best for the country, yet with that being said, the two may go hand in hand in regards with the debt deal. You see, neither Obama nor Boehner can afford to have August 2nd come and go without any deal in place for it would be political suicide.
The fact that they were on T.V. last night shows just how desperate they are as we come down to the final days where a deal has to be reached. They each know that they’re only days, possibly hours away from just having to throw in the towel and say you know what, “I don’t want to be the reason a debt deal doesn’t get done.” We think the market will have this same interpretation and continue to find support as it anticipates a deal getting done by August 2nd. The risk to all of this of course is that if the deadlines does pass without a deal, the market will suddenly appear very overbought and likely pullback 5-10% at least.
Contributing to the direction of the markets today will be a slew of economic and earnings reports. The S&P/Case Shiller 20-city home price index for May, and the Conference Board’s consumer confidence index for July will be reported. On the earnings calendar, we’ll get results from 3M Company (MMM), Amazon.com (AMZN), Ford Motor (F), GlaxoSmithKline (GSK), AK Steel (AKS), U.S. Steel (X), ARM Holdings (ARMH), JetBlue Airways (JBLU), Juniper Networks (JNPR), Regions Financial (RF), and Under Armour (UA).
A few stocks we’ll be watching are TECO, PCFG, SRSR, BIDU, AMZN, IRE, CAMP, RPRX, IDIX, CIG, & NG.
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