-
US debt deal will hide the problem for the short term
-
Stronger economic growth is needed to improve investors' confidence
-
The Share Centre believes markets will remain jittery
As we wait to hear whether the US Congress will approve the deal to raise the debt ceiling Sheridan Admans, investment adviser at The Share Centre, explains what impact this could have on the UK markets.
"We believe the diluted recommendation, as set out by the joint Committee of Democrats and Republicans, is merely pushing the US debt problem further down the track. This situation is not going to go away and we expect the deal to have little impact on the markets, as the net debt reduction is just a tenth of the top figure believed to be required by the Administration and the Ratings Agencies to avoid a downgrade.
"Investors will be interested to see whether the Ratings Agencies chooses to downgrade the US or extend its watch period. Any further negativity is likely to have a detrimental impact on the market.
"Investors should continue to be cautious as the uncertainty in the markets remains. We expect the markets to lack any impetus in the months ahead and believe a period of stability is greatly needed. However contrarian investors may see this weakness as an opportunity as others remain fearful.
"In order to see any signs of improvement, the market needs to be convinced of stronger economic growth in the US and Western economies. Lower unemployment levels, an increase in property sales, manufacturing and exporting will all contribute. However the short term focus for investors will be whether the markets can withstand this troubled period. We believe it is unlikely the markets will make much headway until the economy shows signs of more sustainable improvement."
|
