Brodsky: This Is A Red Flag Warning

zerohedge.com / by Paul Brodsky via Macro-Allocation.com / Jul 17, 2017 2:45 PM

Red Flag Warning

Two identifiable dynamics may signal significant market shifts imminently:

1. The US debt ceiling will be debated soon and signs point towards a messy outcome.

2. Recent economic data have been weak, confirming our thesis that US economic growth is slowing and will not be reversed until a recession is acknowledged.

Debt Ceiling

Excessive debt has a way of catching up with people and institutions, and the first true test for the US government may be at hand. Congress was expected to raise the debt ceiling by October or else Treasury could not fund all the government’s programs and current obligations. Yet talk of Trump tax reform in 2016 may have given taxpayers incentive to defer their liabilities. As a result, Treasury received about 3 percent less in revenues than expected, accelerating the timetable to debate and raise the debt ceiling. Progress on raising the ceiling will unlikely be made in August, as Congress is in recess.

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