The debt ceiling debate may move prices higher as investors flock to gold, according to RBC Capital Markets. “The main near-term potential catalyst for a move higher lies in the debt ceiling debate,” said a senior associate. “Even assuming a deal is eventually reached, we wouldn’t disregard potential growing financial angst as the deadline approaches.” According to JPMorgan strategists, the stock market could see a worse sell-off than it did in 2011 if the crisis is not resolved. Although the strategists believe a national default will ultimately be prevented, they are counting on significantly higher levels of instability. In other news, late boomers have lower levels of wealth, including total wealth, retirement wealth, and 401(k)/IRA wealth, than their earlier cohorts. In a new study by the Center for Retirement Research at Boston College, it was found that late boomers earned less, were less likely to participate in a 401(k) plan, and accumulated fewer assets in those plans as a result of the Great Recession.
Kitco News/Anna Golubova
‘Gold is the best hedge’: The catalyst to take gold price higher is debt ceiling debate, says RBC
Even though much attention is being given to whether the Federal Reserve will pause in June, the debt ceiling debate is the primary near-term catalyst that could move prices higher, said RBC.
“It is indeed monetary policy and the path of the Fed that will determine the medium- and long-term price outcomes for gold, but heightening anxiety about the debt ceiling is the near-term catalyst to watch,” RBC Capital Markets senior associate Allison Enck said in a note.
Aside from the debt cap issue, gold is likely to remain range-bound. “The main near-term potential catalyst for a move higher lies in the debt ceiling debate,” Enck said. “Even assuming a deal is eventually reached, we wouldn’t disregard potential growing financial angst as the deadline approaches.”
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Markets Insider/Phil Rosen
JPMorgan says failure to reach a debt-limit deal could cause a worse stock sell-off than 2011, when the S&P 500 fell 17% in 2 weeks
The stock market could see a worse sell-off than it did in 2011 if Congressional leaders and President Joe Biden don’t resolve the debt-ceiling crisis, JPMorgan strategists said in a note on Monday.
So far, stock market moves have been relatively muted amid negotiations in Washington, and the Cboe Volatility Index — known as the stock market’s fear gauge — has stayed near post-pandemic lows. But the near-default of 12 years ago should serve as a cautionary tale, the firm said in a Monday note, when the S&P 500 crashed 17% in two weeks.
In that episode, the brinkmanship over the debt ceiling caused S&P Global to slash the US’s triple-A credit rating, downgrading the debt tied to the world’s largest economy to AA+ in August 2011.
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MarketWatch/Alicia H. Munnell
Why do late boomers have less retirement wealth than earlier cohorts?
Late boomers have low levels of wealth regardless of how it is defined — total wealth, retirement wealth, or 401(k)/IRA wealth.
A decline in some wealth components had been expected as a result of the rise in Social Security’s Full Retirement Age, the shift from defined benefit (DB) to defined contribution (DC) plans, and a drop in housing values during the Great Recession. But increasing DC balances were predicted to offset the gap, since late boomers were the first generation where workers could have spent their whole career covered by a 401(k) plan.
That did not happen; average DC wealth for those in the middle quintile dropped from $52,300 for Mid Boomers to $32,700 for Late Boomers (see Figure 1). In fact, declines occurred across all but the top quintile.
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