Stocks are primed for a precipitous drop if the U.S. fails to raise the debt limit and delays government payments.
That’s the warning from a team of UBS strategists. Although it’s unlikely, if the U.S. formally defaults and delays all payments beyond principal payments for a week, the S&P 500 will fall as much as 20% toward 3,400, the team led by economist Jonathan Pingle said.
In that case — one of four outlined by the bank — the country could shed at least 265,000 jobs and take a 0.3 percentage point hit to gross domestic product. The S&P 500 would stay suppressed before slightly rebounding to end 2023 near 3,700.
