The House of Representatives voted to increase the debt ceiling yesterday by a vote of 269 to 161. The ratings agencies had
put the U.S. on creditwatch for a possible downgrade if the debt ceiling and the deficit were not addressed. The Senate votes today at noon, and while the imminent possibility of a downgrade is off the table, most observers concede that the long term structural
deficit still needs to be dealt with. As the ongoing turmoil in Europe illustrates, it is not possible to fund the population’s lifestyle with debt instead of growth, both economic and demographic growth. Our market has also been unsettled by the recent economic data that shows a faltering recovery. Second quarter GDP growth came in at 1.3% versus an estimate of 1.8%, and more disturbing, first quarter GDP was revised downward to 0.4% from 1.9%. The August PMI was 50.9 versus 55.3 in July. A reading above 50 generally indicates that the economy is growing.
