Debt Deal Winners and Losers on Wall Street

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In a stagnant economy, there are no winners on Wall Street – only survivors. That goes double for Wall Street’s winners (and losers) coming out of the 11th-hour debt deal between Republicans and Democrats in Washington. While the deal is only pending — nothing’s been signed off on yet – investors took politicians at their word and assumed that a deal was indeed in place.

That’s why stocks on most global bourses took off early Monday on the news before losing momentum over a lousy manufacturing number from the Institute of Supply Management that came out 30 minutes into today’s trading session.

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But an averted debt crisis should have a significant impact on the markets this week, and there’s no telling the winners and losers without a scorecard. Let’s take a stab at it:

Winners
Value investors — The Standard & Poor’s 500 was off 4% last week as a debt ceiling deal eluded Washington pols. But with a deal in place Monday morning, value investors made like the guys on “American Pickers” and found some real steals. Main Street retail plays like Wal-Mart (WMT) picked up volume, as did traditional value stocks like Disney (DIS).
Overseas investors – Stock markets in Tokyo, Hong Kong, Frankfurt, and London were all up early Monday as investors breathed a sign of relief over the U.S. dodging the debt default bullet. In trader’s minds, as Uncle Sam goes, so goes the global economy. While economists talk up China and India, foreign markets know that talking about powerful global economies without mentioning the U.S. is like talking great gorilla movies without mentioning King Kong.
Social Security recipients – Okay, Social Security isn’t a stock, but America’s senior citizens certainly are resting easier this morning after details on the debt deal trickled out. A decrease in Social Security isn’t in the cards on this deal or likely on any potential deal that is struck before the 2012 elections.

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Losers
The “Gold Bugs” – While some commodities should fare well in a post debt-deal market (think crude oil, which many analysts believe is headed higher toward the end of the year), you can’t say that about gold. Investors turn to gold when they think the economy is in big trouble. While nobody is saying the U.S. economy is out of the woods yet (or even seeing many slivers of sunlight), certainly the debt deal restores some much-needed stability to the U.S. economy. And stability is a gold bug’s worst nightmare.

Bank deposit investors – Certificate of deposit investors just can’t catch a break. The thinking was that, with no debt deal by the August 2 deadline, interest rates would rise, thus giving bank deposit investors richer yields. But with a debt ceiling bargain struck, bank rates should remain low for the foreseeable future.

Short-sellers – Investors who sell stocks of companies they don’t own in hopes of buying them back later at a lower price down the line may be disappointed that the market didn’t completely tank today. But the weak manufacturing number drove the stock market down anyway, bringing a smile to the faces of Wall Street’s grim reapers.

Nothing’s etched in stone, and the U.S. economy has a long way to go before any semblance of a recovery occurs. But for now, the financial markets evaded a big fall with the debt ceiling deal. As usual in the markets, big news like that leaves some celebrating, and some crying in their beer. That’s just the Wall Street way – and winners and losers know that all too well.

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