Once again, we are facing financial market distress. The trigger this time is political infighting by Congress and the Obama Administration over raising the debt ceiling to accommodate the level of spending that they have already voted on and approved. Cloaked in their new found fiscal conservatism, Congress has decided to make a stand against their own excessive spending by choosing not to increase the federal debt ceiling that will be reached on August 2nd. Few would disagree with the need to limit spending and reduce the long term deficit path we currently find ourselves on, but is holding the debt ceiling hostage the most effective mechanism? I doubt it.

This is the time of the year when market prognosticators weigh in with their forecasts and predictions for the markets, interest rates and the economy. I’m always amazed that despite considerable intellectual firepower and financial resources, most forecasters and strategists don’t get the direction of any change correct, yet alone the magnitude of any change in the markets or macroeconomic variables.

Having survived the worst global banking crisis since the Great Depression, largely as a result of an astonishing amount of government life support, the relative calm of the past six months or so has been a head fake for investors.