Last Wednesday, the Federal Open Market Committee surprised investors by announcing that the Federal Reserve would not begin tapering its $85 billion asset-purchasing program this month. Investors heaved a sigh of relief, and markets surged on the news. However, the gains lasted for only three trading sessions. Markets experienced a pullback as new concerns weighed on investors’ confidence.
Concerns center around the current level of federal debt, and how Congress may have to raise the debt ceiling again, following hikes in 2011 and earlier this year. In previous years, debt ceiling debates have had catastrophic effects on financial markets (i.e. a 635 point loss in the Dow Jones Industrial Average, one day during the 2011 debt crisis). Investors were initially unfazed by the current debt debate, but have grown increasingly anxious as time ticks by with no resolution in sight.