Treasury Secretary Timothy F. Geithner says the government could hit its $16.4 trillion debt ceiling as soon as mid- February. By a margin of 56 percent to 40 percent, investors embrace House Republicans’ view that any increase in the limit should be matched by equal reductions in future spending.
Biggest Problem
“Spending, our biggest problem, is not being addressed,” says Ted Madaj, portfolio manager at American Agricultural Insurance Co. in Schaumburg, Illinois, who says he’s trimming his holdings of U.S. stocks.
While investors in the poll are voicing concern about the future, the markets so far are showing little apprehension. The 10-year Treasury yield was at 1.84 percent yesterday in New York. That’s up from 1.7 percent on Dec. 28, yet well below the 5.4 percent average over the past 25 years, according to data compiled by Bloomberg.
The Standard & Poor’s 500 Stock Index has risen more than 13 percent over the past year. It closed yesterday at 1,492.56, its highest level in more than five years.
Some investors say they’re worried about an eventual end to the Federal Reserve’s purchases of Treasury securities. Those measures, aimed at spurring economic growth, have lowered the 10-year yield by 80 to 120 basis points, according to Fed Chairman Ben S. Bernanke. Once the central bank halts its market interventions, yields could climb if deficits remain large.
Getting Messy
“What happens if economic growth suddenly picks up?” asks Paul Hickey, co-founder of Bespoke Investment Group in Harrison, New York. “If the Fed turns off the vacuum, the fixed-income market could get messy.”
Though Republicans are winning investor support for their calls for spending cuts, it comes at a cost. House Speaker John Boehner is viewed unfavorably by 46 percent of those surveyed, up from 38 percent in November. Thirty-one percent say they see the Republican leader favorably.
President Barack Obama is viewed favorably by 55 percent of respondents and unfavorably by 41 percent, about the same as in the last poll, in November.