Market Reaction Unlikely to Be Positive Despite Potential Debt Ceiling Agreement

Markets will want to breathe a sigh of relief if lawmakers can reach a deal on the debt ceiling to avoid a default. But markets can’t always get what they want.

The stock market, for the most part, has been ignoring the serious risks associated with the United States defaulting on its debt. But as the Treasury Department’s June 1 estimated default date nears, the stock market is poised to start taking note.

Even once a deal is reached, it could take months before stocks and other financial markets move on.

“One of the concerns I have is that even in the run-up to an agreement, when one does occur, there can be substantial financial market distress,” Treasury Secretary Janet Yellen said on Wednesday.

“We’re seeing just the beginnings of it,” she said, referring to stock and bond market volatility in recent days.

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