I had a thesis about debt ceiling scenario but take this as a grain of salt, as it's just a probability.
If we think global recession could happen in near future, we should be amazed with how nvda is performing now. A lot of story. Basically I may know how AI worked technically in detail, and I believe most people don't realize how much it can go further since they don't really know how much further it can improve and make economy/money
. If we don't like too much fantasy, proven tsla and their manufacturing story (of course they are consuming commodity) also has shown that it is unlikely US manufacturing will lead global economy into recession in next few months. Debt ceiling is way very important for the US to avoid their recession (yes I understand CRE issue and all of those stuff). The US is currently booming big. Should they kill their 30-60T$ of golden gooses now (AI, manufacturing, sustainable energy) for sake of limiting debt in size of only few T$ ? I doubt, unless of course many big guns have big size in their activist funds, in which I doubt as well. So high probability that debt ceiling could continue to support US growth, even if it has to cause higher inflation. We should understand that only US has debt ceiling drama, most other countries have limitless ceiling on their roof
Now the question is rather if debt ceiling or fiscal incentive continues to run big, what are their risks?. In my thesis, it may mean continuing higher fiscal deficit or higher fiscal QE and of course should be higher inflation (rather than lower, no?). Manageable inflation is ok but if their money growth is not sanitized, it could trigger negative effect. I think if inflation effect is going worst, the Fed will increase SOFR higher or same as their Fed rate in which will withdraw the 2T$ RRP (since the cost to service is higher than its return). I think withdrawing 2T$ RRP is also similar to monetary easing. Basically US is playing the world with ping pong between fiscal QE and monetary QE during inflationary era. They still do have a lot of money to survive high inflation. Other countries? I don't know.
If people asked about US small banks issue with their HTM, in my opinion, there's nothing to worry about it. That issue is merely about liquidity in which their HTM issue will go expired and solve the problem automatically. Fact, since FRC entered JPM, all discount windows seems to disappear.
My thesis: (1) low probability of recession in next few months (2) good deal of debt ceiling (3) higher SOFR to withdraw of RRP if inflation bites.
I could be wrong, debt ceiling may fail, US may go default, and this share price might continue to chase their recession fantasy. We'll replay horror movies once again. Let it be.
(20min delay)