Sunday, 13 October 2013

High volatility this week ... or another financial crash.

We're only 5 days away from the US government defaulting on its debt. If that happens, everyone will have something to worry about. But let's just assume (and hope!) that the US senate will sort it out somehow, however incompetent they may seem currently. Reports say that the Republicans are slightly more willing to negotiate on reopening government than Obama, but I wouldn't worry, I'm sure Obama would prefer to lose face surrendering his "Obamacare" plans to the Republicans than be remembered as as the 1st black president ... and also the man to plunge the world back into crisis just as it was showing signs of recovering.
Whatever happens, we can expect higher volatility while more cautious investors dump more vulnerable stock and plough money into defensive shares. At the same time, optimistic investors will be trying to snap up the subsequent bargains and volume. I expect almost everything will be increasingly more volatile the closer we get to "default day" as big buyers of US debt (China, Japan etc.) will lose confidence in the states' political system, even if it is resolved, suggesting lower future investment. Retail shares in particular would suffer so look out for bargains (or chances to get out, depending how steely your nerves are), this coming week.

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