Prominent market commentator Jim Cramer reportedly told investors on Thursday it was too early to get bullish on the market, even if lawmakers reach a consensus on the debt ceiling crisis.
“I keep recommending you maintain a high-cash position, even if the Democrats and Republicans cut a deal, because last time it was the gut punch of the S&P downgrade a few days later that really crushed us,” he said, according to a CNBC report, while referring to the market’s sharp decline after the 2011′s debt ceiling deal.
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Cramer’s comments come at a time when Fitch Ratings has placed the ‘AAA’ Long-Term Foreign-Currency Issuer Default Rating of the United States on Rating Watch Negative, in the wake of continuing political stand-off between President Joe Biden’s administration and Republican lawmakers in regard to the borrowing limit.
According to the market expert, so far, this year’s debt ceiling debacle has been running parallel to that of 2011, making the S&P’s past downgrade especially prescient. “So, knowing what we know about 2011, it’s premature to get bullish on this market,” Cramer said. “Best to keep the cash on the sidelines and waiting,” he added.
Although the equity market did reflect signs of concerns earlier this week, NVIDIA Corporation’s NVDA upbeat forecast and the sudden investor interest in AI stocks balanced the sour sentiments. The SPDR S&P 500 ETF Trust SPY closed 0.87% higher on Thursday while the Invesco QQQ Trust Series 1 QQQ gained 2.43%, according to Benzinga Pro.
Debt Ceiling: According to latest developments at the time of writing, Biden and House Speaker Kevin McCarthy are closing in on a deal that would increase the government’s $31.4 trillion debt ceiling for two years while limiting spending on most items, reported Reuters citing a U.S. official.
The deal, which has not been finalized, would increase funding for discretionary spending on military and veterans while essentially holding non-defense discretionary spending at current year levels, the report added.
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