According to the following article, we can draw the following trading recommendations:
– If the U.S. debt defaults, it will have a serious impact on the U.S. financial system and could trigger a global financial crisis. Therefore, we should reduce our investment in U.S. financial stocks or short the U.S. financial stock index.
– At the same time, a U.S. debt default would also cause the U.S. dollar to depreciate, which would be beneficial to gold and other safe-haven assets. Therefore, we should increase our investment in gold and other safe-haven assets, or go long the gold and other safe-haven assets index.
– In addition, a U.S. debt default would also affect U.S. economic growth and inflation expectations and have a negative impact on U.S. Treasury yields. Therefore, we should reduce our exposure to U.S. Treasuries or short the U.S. Treasury index.
– Finally, a U.S. debt default will also create uncertainty in the global economy, to the detriment of emerging markets and developing countries. Therefore, we should reduce our investment in emerging markets and developing countries, or short the emerging markets and developing countries index.
The original article is as follows:
Caixin, May 19 (Editor Rui Liu) – U.S. Treasury Secretary Yellen warned U.S. bank executives on Thursday that failure to raise the debt ceiling in a timely manner would have a “catastrophic” impact on the U.S. financial system if the U.S. defaulted on its debt. Yellen reiterated that the U.S. debt problem should be resolved immediately.
The U.S. debt crisis will be a disaster for the U.S. financial system
Yellen met with more than 20 chief executives of U.S. banking giants and other executives at a meeting called by the U.S. Bank Policy Institute on Thursday, EST.
The meeting was held in Washington, D.C., and participants included JPMorgan Chase CEO Jamie Dimon, Citigroup CEO Jane Fraser and Bank of America CEO Brian Moynihan. Moynihan), among other large bank executives.
As June 1 – the “X-Day” of U.S. debt default that Yellen warned about – gets closer, the risk of a U.S. debt default is growing. Unless the U.S. Congress can raise the debt ceiling as soon as possible, the United States may fall into debt default.
The U.S. Treasury Department said in a statement that Yellen “discussed the urgent need for Congress to address the debt ceiling and highlighted the real and serious consequences of a default on the banking system, the U.S. domestic and global economies.
The Treasury statement said Yellen emphasized that failure to raise or suspend the debt ceiling in a timely manner would be “catastrophic” for the financial system, households and businesses – a sentiment echoed in public comments by banking executives such as Dimon.
A person familiar with the matter said that Yellen also held a meeting with executives of mid-sized U.S. banks on Thursday. In this meeting, the CEOs of many mid-sized banks expressed serious concerns about how the debt ceiling impasse will affect their institutions as well.
The meeting came a day after executives from the U.S. banking giant met with U.S. Senate Majority Leader Chuck Schumer (D-N.Y.) and other lawmakers on Wednesday, EST, to discuss the U.S. debt ceiling issue.
Will continue to closely monitor regional banking risks
Yellen also discussed with U.S. banking executives the recent problems in the U.S. financial sector and the actions taken by regulators following the collapse of several regional U.S. banks in the past two months.
Yellen reiterated the strength and soundness of the U.S. financial system and made clear that the U.S. Treasury would continue to closely monitor conditions across the banking sector, the press release said.
According to the press release, Yellen acknowledged the industry’s efforts to resolve the First Republic Bank crisis. Earlier this month, First Republic Bank went into receivership and was acquired by JPMorgan Chase. Yellen said she “appreciates the leadership and support of many participants in responding to these market developments.
In addition, sources said Yellen also held a meeting Thursday with the Midsize Bank Coalition of America (MBCA).
The MBCA represents about 100 midsize banks across the U.S., including about eight from California – where the previously announced collapse of First Republic Bank and Silicon Valley Bank are headquartered.
Yellen also touched on the debt ceiling and banking stress at the meeting, while numerous mid-sized bank executives expressed concern.
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