The 5 issues worrying investors with a potential train wreck looming in Washington

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Laurence Griffiths/Getty Images

John Boehner is leaving the third most powerful post in America, the November 5 debt ceiling deadline is looming, and Donald Trump is a GOP front-runner.

It’s already been an unbelievable year in politics.

Investors are now asking: what will happen next?

Independent investment firm Compass Point Research and Trading published a report Monday addressing the top client questions.

It said: “We spent last few days making the rounds to assess both the practical and legislative impacts of ongoing House GOP leadership turmoil.”

Scroll down to read about the five issues that are on investors’ minds.


1.Who will be the next Speaker of the House?

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Boehner signs the trade legislation to send to Obama’s desk.
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John Boehner

“If you ask five people in D.C. who will have the speaker’s gavel in December you will hear at least eight different answer,” the analysts said.

Compass Point threw out a few names that have been mentioned repeatedly:

1. A reluctant Rep. Paul Ryan (R-Wisconsin)

2. a big-name such as Newt Gingrich, J.C. Watts, or Dick Cheney could return as a “caretaker” – though Compass Point thinks that’s less likely

3. A currently serving House representative

“If we had to put our chips down on the House GOP leadership roulette table today, we would split them equally between Rep. Ryan and the field,” analysts wrote.


2. Should we worry about the November 5 debt ceiling deadline?

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C-SPAN

No, says Compass Point analysts.

“Given that Speaker Boehner will keep the gavel until there is leadership clarity, we do not view theNovember 5debt ceiling deadline as particularly worrisome. Our sense is that if the House GOP leadership issue is unresolved by the end of the month, then Speaker Boehner will embrace a short-term debt ceiling deal likely punting the issue to mid-December.”


3. How worried should we be about a December fiscal crisis?

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“Silicon Valley”/HBO

Although onlookers shouldn’t be too concerned about the November 5 debt ceiling deadline, Compass Point said a mid-December fiscal crisis is increasingly likely.

“Our base case remains that lawmakers will realign the debt ceiling deadline with theDecember 11federal government spending deadline which could result in both debt ceiling brinkmanship and possibly another government shutdown,” they wrote.


4. Will the federal government default on its debt?

“Our view remains that the debt ceiling will be addressed in advance of any upcoming deadlines, but we expect the political conversation to become considerably worse before a deal emerges,” Compass Point said.

“In recent years we have operated under a form of blind political faith that a debt ceiling deal would emerge at the eleventh hour,” the analysts wrote. “We are still clinging to that faith despite ongoing leadership uncertainty.”


5. Would the FOMC raise rates if the government is shut down?

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Federal Reserve Board Chairwoman Janet Yellen delivers remarks at a news conference following a Federal Open Market Committee meeting September 17, 2015 in Washington, DC.
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Win McNamee/Getty Images

“A lengthy government shutdown during the FOMC’s December meeting will surely give some voters pause, since the 2013 government shutdownshaved ~0.25 percentage pointsoff the annualized GDP growth rate,” the analysts wrote.

“If the FOMC leaves rates unchanged in October, its next meeting could be during a federal government shutdown which would complicate the committee’s decision and likely lessen the odds of liftoff in 2015.”

The FOMC is scheduled to meet starting October 27 andDecember 15, while the federal government is certain to be funded through December 11.


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