Amid reports that the US Government ran a near $1 trillion deficit during the 2016 calendar year, the stage is being set for another breach of the US debt ceiling. Although the Trump Administration is likely to raise the debt ceiling shortly with the move backed by Treasury Secretary nominee Steven Mnuchin, there is only a limited likelihood of the US defaulting on its debt, but it has nevertheless raised the issue of fiscal responsibility. With the President promising to trim budgets and focus more on fiscal discipline, lower spending may negatively impact stocks despite the recent rally in equity indices.
Adding to the troubling government spending reports is the widening US trade deficit which printed at $502.25 billion, marking the highest point since 2012. Nevertheless, stocks managed to display a positive response, with the S&P 500 climbing for four of the last five sessions.