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US political stalemate is a buying opportunity

Multi-managers believe the political stalemate in the US could be a prime opportunity to buy more risk assets although there is concern about the looming debt ceiling.

Last week, for the first time in 17 years, the US government partially closed down after the Republicans refused to agree spending plans that included President Obama’s affordable health care scheme, despite the reforms already being signed into law. If Congress does not agree its budget soon, it will run out of money on 17 October unless its debt ceiling is raised. 

JP Morgan Asset Management Fusion fund range lead manager Tony Lanning notes suggestions which estimate that for each week the government is closed, 0.12 per cent of economic quarterly annualised growth is lost.

Lanning says: “The debt ceiling and the impact of the shutdown could provide a meaningful opportunity to add more risk to our portfolios. So far markets have taken these events broadly in their stride.”

Fidelity Multi Asset Defensive fund manager Trevor Greetham remains bullish and believes when the smoke clears, investors will see an “equity-friendly backdrop.” He adds: “Any stock market weakness should present a buying opportunity.”

However Lanning views markets as being very complacent in regards to the debt ceiling. He says: “It seems to imply that investors have concluded that the ceiling will have to be raised, which it has been many times before.

”But were it not, several ratings agencies have said they will determine the US is in default if it misses even one interest payment. The market has not priced this in.

Hargreaves Lansdown senior investment manager Adrian Lowcock says: “This does not look like a selling trigger. Investors should focus on their long-term goals and use any short term weakness as opportunities to invest.”

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