Optimism over a deal to avert a federal debt default lifted U.S. stocks late Wednesday morning to near an S&P 500 record.
The jump came as Senate leaders rushed to send a budget deal to the House of Representatives for a vote one day before the nation’s borrowing ability expires.
“It appears that risk assets are anticipating a conclusion to the uncertainty, which is always a positive for the capital markets,” said Jim Russell, regional investment director for US Bank Wealth Management in Cincinnati, told CBS MarketWatch.
“The markets are cheering not only the removal of uncertainty, but the possibility of two positives down the road: number one is deficit reduction and number two is the possible removal of sequestration cuts. Perhaps some more thoughtful deficit-reduction techniques would be in play,” said Russell.
Closer to home, Greenville financial adviser Ike Trotter said even if hopes for a deal sag later in the day, he will advise his clients to stay the course. Much of his confidence rests with the knowledge that his clients have long followed his primary advice to diversify investments.
“From my 38 years of experience doing this, I know some money is always being made somewhere. For the average person to make money, he should try to diversify,” said Trotter, who writes a financial column for The Mississippi Business Journal.
Clark Smith of Jackson hedge fund Woodridge Capital advised that the market is saying that staying put may be the best strategy. “The stock market is saying it strongly anticipates a deal,” Smith said.
Woodbury, which oversees a $160 million hedge fund, began hedging some the past few days after seeing share values drop on some key stocks that previously had been doing well, according to Smith. The fund reacted by putting about 25 percent of its assets into cash to offset potential losses that would accompany a federal debt default. “If it it doesn’t play out, I will move that money right back in,” he said.