We can only hope that the factions in the Congress have watched and learned the dithering and brinkmanship on this side of the Atlantic and realize what happens when politicians look like they don't know what they are doing.
Markets hate uncertainty, it is hardly surprising that they have become capricious comedy of wheezing sequence of new to save the eurozone, last week, which resulted in a proposal for French Bank tax emerged from nowhere and disappeared just as quickly. European leaders are what make up that they go along, as Greek bail out package of confirmed Thursday.
It is almost unthinkable that Washington itself by default, would therefore thrashed opportunities must be on some sort of compromise being in-depth next week. The debt ceiling will be high and a kind of long-term deficit reduction plan hatched because they must be. Despite the demonstration of Europe in the way that builds confidence, I would be surprised if the negotiation of horse went to the wire.
Markets are thirsty for clarity and to behave strangely in his absence. One of the curiosities of recent years has been the way in which copper and gold have increased in lock-step since the financial crisis.
The wisdom is that Dr. Copper increased when the situation seems to be light for the world economy, but that gold is the product of choice when panic is the watchword.
As shown in the figure, however, the red and yellow metal can both in favour at the same time if the world economy be confused that it is today. Copper is on a tear, because demand in the emerging world remains strong. The new force is an indication at the beginning of the second half of 2011 that may be good for investors on the back of a landing smoothly in China. However, however, increases because the developed world is flirting with disaster again.
A second curiosity has been the resilience of equity markets for the tragedies unfolding of both sides of the Atlantic. Who would have predicted the market would bounce autour in such a narrow band of the impending implosion of the euro or default by Uncle Sam?
As Citi said last week, Europe's equity markets have doubled and reduced half twice each in the past 10 years.
In the current circumstances, it is moving sideways crab as the particular response. Or is it? Perhaps equity markets merely seek through the cuffs to a fundamental underlying. Despite all the macros and the political risks, the performance of the shares reflects the fact that Europe's sovereign crisis and tax disputes across the pond have not reflected material GDP downgrades or declining profits.
Companies, especially those who have healthy exposure on emerging markets are fairly well. It is early days yet, but in the second quarter earnings season looks as if it will be relatively favourable - Apple and IBM beat expectations, Coca-Cola has been well received, even Morgan Stanley hurt less than feared. Assessments, in addition, provide a solid basis to the levels of today.
The US market has, so far, upgraded its international peers this year. I am not surprised. Then the Chinese are curb inflation, the UK sticking stubbornly to a reader of austerity Plan and the Europeans, inexplicably, increase the rate of interest in the teeth of the existential crisis of the euro area, the United States have become aware that the response is growth. The "Bernanke put" remains in place, therefore suppose that American politicians can avoid doing something really stupid in the next week, the case for us equities still looks convincing.
But Europe also, and perhaps that it is now reasonable to ask what could go right. Course, Summit Thursday did not remove the risk on European markets, but when investors are also concerned that they have recently, relief rallies accompanying unusual demonstrations of a common goal can be painful to miss.
There is even one danger that, after having exhausted all other options, we will do the right thing.
? Tom Stevenson is a Director of Fidelity International investment. The views expressed are his own. Twitter: @ tomstevenson63
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