Morgan Stanley’s US equity strategist Michael Wilson says the the debate around raising the US government’s borrowing limit will trigger sharp swings in equity markets.

• most clients “believe it will ultimately get resolved, but not without some near-term volatility”
• many have framed the event as “a lose-lose for markets.”
• when the US Treasury’s cash runs out it could potentially squeeze liquidity and lead the S&P 500 lower, “given the index’s sensitivity to changes in liquidity in recent history.”

Wilson's note was reported by Bloomberg (gated). More:

• Although the first-quarter reporting season has been largely better than feared, Wilson said he remains bearish in his forecast for full-year profits amid slowing economic growth. “The market is speaking loudly under the surface — it is bracing for further macro and earnings disappointments,”

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Further talks between Biden and congressional leaders are scheduled for 3pm US Eastern time on Tuesday, 16 May 2023.

This article was written by Eamonn Sheridan at www.forexlive.com.

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