The sparring politicians in the US can dress it up any way they want but this was a pyrrhic victory for the Democrats, a shattering defeat for the beleaguered Republicans and a travesty enforced upon the American people.
Last week, after a 16-day government shutdown and endless hours of negotiations and nonsense, the two parties and two parts of the US government decided to raise the debt ceiling. There are three key takeaways, in our opinion.
First, and most import-antly, this is another calamitous own goal from the US politicians. Politics remains the greatest extant risk for financial markets and this again underlines the reasons why.
The behaviour of the politicians over the last month is no way to get confidence soaring through the veins of companies and consumers.
President Obama said: “We will begin to reopen our government immed-iately and we can begin to lift this cloud of uncertainty and unease from our businesses and from the American people.”
Good luck, mate.
Second, we are going to have to get used to this form of dysfunctional dialect of politics in the US.
This latest “agreement” is only another shoddy sticking plaster applied to a gangrenous wound. The next skirmish has only been delayed to the early days of 2014. Now that is really something to look forward to.
Third, this muddies the turbulent waters of US politics even further than they were a month ago. A toxic air still hangs over Capitol Hill.
As the dust settles, the Democrats will claim victory but they should note that they were fighting a battle that the Republicans had no chance of winning.
This defeat will spur on the Tea Party activists who will see the emerging star of the South, Ted Cruz, as the man to carry their fight to the less extreme Republicans and maybe even to the next presidential primaries.
His hard-line stance in this battle will have been admired by those to the very right of the Republican party.
What does this mean for our portfolios?
Despite the fears that we hold over US politics, we still believe that equity markets are likely to rally into the year end.
Global economic momentum is accelerating and we expect corporate results to be broadly supportive although they will not be spectacular.
There are still good pockets of value in Europe, Japan and Asia while cyclical sectors such as Industrials and Financials should benefit from an improving economy.
Most other assets appear to us to be fairly valued, neither very expensive nor (sadly) very cheap.
However, we need to learn from the events of the last few weeks, recognise the risks that remain and if we decide to break with diversification at this juncture, then
we would be as mad as the US politicians.
Tom Becket is chief investment officer of Psigma Investment Management