From Zacks.com
Dear Subscribers,
Stocks moved higher once again on strong earnings and increased hope of a debt deal. I know that Boehner and the President have both said no deal is yet done as of Thursday evening. But my gut sense is that the Republican Senators strategy is correct.
That being that whatever deal they can get through the House and Senate will NOT be vetoed by the President. Yes, even a deal with no tax increases. Or even a deal that cuts DEEPLY into many of his favorite programs. Or even a much larger cut than what the President is looking for.
Why would he sign it if he was opposed to many of its elements? Because time is not on his side to get a new deal done. So with the pen in his hands and the eyes of the world staring down…there is just no way he cannot sign and be labeled the guy that put the US into default. That would be political suicide. So President Obama's best bet is to sign whatever deal is in front of him and hope that he can fix some issues he doesn't like down the road.
Investors sense this too is at hand and that is why stocks press higher. Note that if investors are wrong and a deal does not get done in time, then we will be handing back a good 3-5% of the recent gains in short order.
Best,
Steve Reitmeister
Executive VP, Zacks Investment Research
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