Wall Street: Keeping Calm in the Face of a Default?
The deadline is fast approaching for Congress to raise the debt ceiling. If they neglect to pass such a bill, the U.S. would default on its loans — a first — and a catastrophic financial crisis would likely ensue. That said, it’s understandable to crane our fiscal heads over to Wall Street and ask how the folks over there are handling the current situation. The answer — surprisingly — is that they are doing just fine, though how long that will last is up for debate.
The Dow Jones closing price fell a mere 0.4 percent from its close on Monday, according to USA Today, from $15,129 to $15,072 at its close on Friday. Beyond that, the Volatility Index, or VIX– a consistently used measure of stability and fear — actually decreased 5 percent from 17, and even at its peak, never broke 18.71.
Compare this to the first default scare back in 2011 when the VIX doubled in mere days, and Bank of America Chief Investment Strategist Michael Hartnett says “The VIX has barely risen.” Hartnett also points out that while investors pulled $60 billion out of the stock and bond mutual funds in August of 2011, only $1 billion has been removed at present.