[ANALYSIS] The US debt ceiling and local bourse performance

'What is the US debt ceiling, and why is it that so important it is bogging down even other markets like ours? And even if a deal is arrived at to avert a default, why should it not be a cause for rejoice?' Opinion

, I pointed out the market made at least three attempts to climb higher after it managed to break out on April 28 at its immediate resistance level of 6,600.

Funny, I was blindsided by the optimist in myself to make the fearless forecast that the market – despite the telltale signs of a breakdown – will make an upward bias by the week’s end. But as you will remember, the market even fell lower on Friday last week. In other words, I went against – and did the reverse of – the market saying which says, “A bird in hand is worth two in the bush.”

Moody’s study claimed that an economic downturn triggered by a US default may even overshadow the global financial crisis of 2008. It also claimed that as many as 7.8 million jobs could be lost, and stocks would fall by almost a fifth, erasing $10 trillion in US household debt. The contagion would spread to global markets, it added.

Based on government debts issued for the purpose, investors will find US Treasuries better than stocks. That will temporarily suck some liquidity out of the stock market, the commentary further added.

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