May 24, 2023

(WHO IS IMPACTED IF THE U.S. DEFAULTS ON ITS DEBT)

May 24, 2023

Hello everybody,

98 times in the past, the debt ceiling has been raised. Why should this time be different? If it is different this time, who takes the brunt of the effect?

Let’s see.

First, we have the veterans. There is a bill of $12 billion on June 1 for veterans’ benefits. If there is not enough money on hand to pay those benefits, people who have already sacrificed a lot for their country will have to sacrifice a lot more. There are people on very low, sometimes fixed incomes who rely on these payments as a lifeline to pay for housing, pay for food, to pay for expenses for children and other family members.

The government is also scheduled to pay $12 billion in military and civilian retirement benefits on June 1. If those payments are delayed for any length of time, people with little or no savings might have to turn to credit cards, which carry increasingly costly interest rates.

The government is scheduled to pay $25 billion in Social Security benefits on June 2 – one of several big payments the program will make over the course of the month.

Another group that would be impacted would be home buyers. The real estate website Zillow estimates that a prolonged government default could send mortgage rates soaring as high as 8.4% from about 6.4% today. That would put homes out of reach for hundreds of thousands of would-be buyers.

Other payments that would be jeopardised include the following:

$47 billion for Medicare providers, due on June 1.

$1 billion in tax refunds, set to go out June 7.

$4 billion in federal salaries, payable on June 9.

Others include:

Food stamp recipients. Education programs, Défense contractors.

Ok, let’s look at the markets for a bit.

The S&P advance should persist and is still able to extend on to the next resistance at around 4310 – 4325. Above this resistance lies 4385.

The U.S. stock market’s advance this year has been led by the Nasdaq index, with the FANG stocks leading the charge forward. In late March this year, the Nasdaq completed a bullish 9-month inverse Head and Shoulders reversal pattern, yielding up an upside target around the 15,600 level. This target remains in play. If this target is punched through, we could see 18,000.

If you were looking to buy any stocks now, I would be looking at Apple, which has a target of around $190, and Microsoft, which has a target of around $345.

GOLD – a correction is in progress. We could get down to around $1920. Then you want to buy with both hands. Look at GOLD, WPM, and SLV. First target is around $2,360.

U.S.$ - Look to fade the dollar very soon. Start buying small parcels of AUD, Euro, Pound, NZ$, and Yen.

 

 

Wishing you all a happy mid-week.

Cheers,

Jacquie