The head of investment at “The Family Office” Wassim Jumaa said that the markets were afraid of not reaching an agreement on raising the US debt ceiling this time for several reasons, the most important of which was the great polarization in the US Congress, which did not exist in 2011.
He added in an interview with “Al-Arabiya” that the current comparison is with what happened in raising the debt ceiling in 2011, and when looking at the economy in general, the current time is the beginning of an economic cycle, while in 2011 it was the end of the economic cycle, and the economy was recovering during it, and monetary policy at that time was adopting Quantitative easing While monetary tightening is currently in place, the amount of debt has also doubled dramatically over those years.
He stated that in 2011 there were no alternative options for people to the dollar, but today there are more euros and yuan.
For the aforementioned reasons, this fear and tension arose among people because things in the current period are not similar to what they were in 2011, and although the possibility of the United States defaulting on payment was low, it was expected that there would be a delay in the agreement to raise the debt ceiling, and the evidence for this is that the returns on US Treasury bills for a month somewhere reached 6% compared to their longer-term counterpart, which indicates that investors were concerned about the US delay in paying obligations in the near term, and this was reflected in fear specifically in the bond market, “according to Jumaa.
He explained that the stock market was inclined that the crisis would end and was optimistic, based on the expectation that the crisis would be resolved sooner or later. It is unreasonable that the issue of repaying the debts of the largest country in the world be discussed on the table, and from this perspective was the fear and fluctuations in the market. I rule out an impact on the US economy after cutting spending by 5% in the US budget.
He said at a time when monetary policy raises the interest rate, to increase those who want to borrow, there are other sectors that benefit from government spending, just as the United States passed the American Innovation and Manufacturing Act and the Chip and Science Act, this shows that the state is spending on certain sectors.
He pointed out that these sectors have opportunities for investment and identification of “biotechnology”, and this is a promising sector, and there are other sectors related to technology, specifically semiconductors and artificial intelligence, and those sectors that the government spends on, the investor must look at them in a different way than what he looked at them 10 years ago.
He added that the strategy of buying and waiting is no longer valid in the coming period, and the investor must resort to a good investment manager to manage his investment portfolio. A good investment manager to lay the foundations for benefiting from stocks that represent opportunities in the market.
He said that in light of the tightening of monetary policy and the turmoil in the market, there is only this strategy.
Jumaa considered that it is too early to talk about the imminent end of the dominance of the dollar as a reserve currency worldwide, as evidenced by the fact that in light of the debt crisis, some investors will buy short-term treasury bills, and when they got the money, they could not find another way to invest it except by depositing it in banks, and therefore the dollar’s position was strengthened. The deposits of US banks stabilized for a period and then rose slightly again, and this is evidence that any of the other currencies, whether the euro or the yuan or others, did not absorb this amount of dollar liquidity in the market.
He pointed to the possibility of the dollar’s weakness during the coming period because some central banks continue monetary tightening, while expectations indicate that the US Federal Reserve may stop the interest rate hike.