Market Commentary
Brian Stutland

What you need to know before the opening bell May 24

  • Debt-limit talks stall as time runs short to avert US default: The US government is running out of time to raise its debt limit, and there is no sign that Democrats and Republicans are close to a deal. If the debt limit is not raised, the US could default on its debt, which would have a devastating impact on the economy.
  • UK’s stubbornly high inflation fuels bets for higher rates: Inflation in the UK is running at a 40-year high, and there is growing speculation that the Bank of England will raise interest rates by 0.5 percentage points at its next meeting. A rate hike would be the biggest since 1997, and it would come as a blow to businesses and consumers already struggling with rising prices.
  • Chinese stocks wipe out 2023 gains as headwinds intensify: Chinese stocks have wiped out their 2023 gains as investors worry about the impact of the country’s zero-COVID policy, the war in Ukraine, and rising inflation. The Shanghai Composite Index is down 15% year-to-date, and the Shenzhen Composite Index is down 20%.

These are just some of the key stories investors will be watching before the opening bell on May 24. With so much uncertainty in the market, it is important to stay informed and make sure your portfolio is properly diversified.

Additional details:

  • Debt-limit talks: The US government is currently borrowing more money than it is taking in, and the debt limit is the maximum amount of money that the government is allowed to borrow. If the debt limit is not raised, the government will not be able to borrow any more money, and it will eventually run out of cash to pay its bills. This would lead to a default on the US debt, which would have a devastating impact on the economy.
  • UK inflation: Inflation in the UK is currently at 9%, which is the highest it has been in 40 years. The main driver of inflation is rising energy prices, which have been caused by the war in Ukraine. The Bank of England is expected to raise interest rates in an attempt to bring inflation under control, but this could lead to a slowdown in economic growth.
  • Chinese stocks: Chinese stocks have been under pressure in recent months due to a number of factors, including the country’s zero-COVID policy, the war in Ukraine, and rising inflation. The Shanghai Composite Index is down 15% year-to-date, and the Shenzhen Composite Index is down 20%.

The lion’s share of the attention is on the debt ceiling and the angst it is causing. Two weeks ago, the market was looking past this event, seemingly saying there is no real risk they are always going to make a deal. My base case then as it is now is that yes a deal is very likely to get struck, and it’s also very likely to be too late. The longer we get to the deadline, the more volatility will rise, and the later it comes, the more likely we move away from a soft landing and into a hard landing.

These are just some of the key stories investors will be watching before the opening bell on May 24. With so much uncertainty in the market, it is important to stay informed and make sure your portfolio is properly diversified.