In an interview with Bloomberg on Monday, the Abrdn investment director pointed to ongoing talks between President Biden and lawmakers, who are still sparring over the conditions to raise the country’s borrowing limit.
The White House and member of Congress will likely reach a deal before the US defaults on its debt, Athey said, but a solution will probably involve spending cuts, which will be a headwind for equities.
“Almost by definition you need to see something given to the Republicans to get them on board, and of course that’s likely to take the form of spending cuts, and that’s a gross headwind, which I don’t think is at all baked into markets at the moment,” he said. “I think we get a deal, I don’t think anyone is delighted about it, but everyone’s somewhat satisfied. But I think there is still downside risk to equity and bond yields on the fact that it’s likely to be impeding growth going forward.”