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'Clear Path' Needed on Deficit Reduction, BlackRock SaysPrinter Friendly Email Reprints Reader Comments Share | August 1, 2011Tom Steinert-ThrelkeldBlackRock, the large investment manager, said that the benefit of a debt limit deal will only be borne out if investors “see a clear path toward deficit reduction that encourages confidence in the U.S. dollar.’’Like what you see? Click here to sign up for Securities Technology Monitor's weekly newsletter to get the latest news and analysis that matters to the effective operation of capital markets.The manager of $3.6 trillion in assets for institutional and individual investors around the world said it was “encouraged by momentum” to raise the debt celing and cut the federal deficit.But it said, in a formal statement:“The precise composition and timing of any spending cuts will determine whether this proposal produces a real and significant reduction in the deficit. Avoiding default by the U.S. government is of paramount importance, but investors also need to see a clear path toward deficit reduction that encourages confidence in the U.S. dollar.“This is essential if we are to maintain America's AAA rating and encourage long-term investment in the U.S.”“America cannot afford further delay. With the U.S. economy continuing to show weakness, every day of delay in resolving this situation will erode economic growth, jeopardize job creation and undermine the credibility of the United States in global financial markets.BlackRock operates in 26 countries in North and South America, Europe, Asia, Australia and the Middle East and Africa.The BlackRock assessment comes after a weekend of brinksmanship that resulted in a debt limit deal before securities markets opened worldwide on Monday. Here’s The Hill’s summary:Congress and President Obama have a deal on raising the debt ceiling but the timing of the agreement, made late Sunday evening, leaves lawmakers on a tight schedule to get it passed in order to avoid a default.

The deal cuts spending by close to $1 trillion immediately and mandates a 12-member joint committee to create additional ways to reduce the deficit by at least $1.5 trillion over the next ten years. The committee must report its findings by late November. The package does not contain any tax increases.Additionally, Obama would get a second debt limit hike of up to $1.5 trillion if Congress either sends a balanced-budget amendment to the states before the end of the year or if the joint committee finds more savings and cuts.A vote on the deal is expected to take place Monday, though an exact time is yet to be announced.If you look further into the week ahead, you’ll find the debt deal also was something of a birthday present for President Obama. He turns 50 on Thursday.BlackRock, the large investment manager, said that the benefit of a debt limit deal will only be borne out if investors “see a clear path toward deficit reduction that encourages confidence in the U.S. dollar.’’

An overnight poll of 1,000 affluent Americans conducted Thursday evening by UBS Wealth Management Americas found that 40% are waiting out a resolution on the debt ceiling before putting any more money in the markets.

Commenting on Friday’s news from the U.S. Bureau of Economic Analysis that the economy grew an anemic 1.3% in the second quarter, The Conference Board said that from a business cycle perspective, there still aren’t signs that the economy has re-entered a recession. However, the business research organization does not expect GDP to grow more than 2% in the remaining half of the year.

As the nation reaches the Aug. 2 deadline to raise the debt ceiling, Fidelity Investments is telling investors not to panic-sell out of stock and bond funds, and to have confidence in money market funds, which have been safeguarded and have complied with stricter holding rules for the past year.

A majority, 63%, of middle-class Americans thinks that the U.S. is in a double-dip recession, the First Command Financial Behaviors Index shows. Fifty-percent thought the U.S. had reverted back into recession last summer.

Need a reason for optimism about the U.S. economy? The Hartford’s chief investment strategist for wealth management has six.

There are two gigantic economic crises weighing heavily on the minds of investors and government leaders right now: the raising of the debt ceiling and the risk to the country’s venerable AAA sovereign debt rating.

As Europe stemmed fears of contagion from Greece’s default by arranging voluntary rollovers of private bonds and the United States hammers out a deal over its debt ceiling, stocks tentatively moved up in Tuesday trading.

The Conference Board Consumer Confidence Index improved slightly in July, rising 1.9 points from the previous month to 59.5 (1985=100). As well, the Expectations Index ticked up 3.8 points to 75.4. However, the Present Situation Index decreased by 0.9 points to 35.7.

The State Street Investor Confidence Index for July inched up 2.2 points to 101.1, State Street Global Markets reported Tuesday. However, in North America, the index fell 1.3 points to 99.2.

Advisers are more confident than they have been since January, but they are still concerned over the disconnect in the marketplace, according to The Advisor Confidence Index (ACI), a benchmark that gauges advisor views on the U.S. economy and stock market.

Americans’ outlook for the economy darkened in June, a Harris Interactive poll of 2,183 adults in mid July found. Thirty-one percent are afraid that the economy will worsen in the coming year, 41% don’t expect any improvement, and only 26% are hoping things will pick up in the coming year.

There is a lot of concern among investors about the looming Aug. 2 debt ceiling crisis, with investors wondering whether they should take steps to protect their assets in the event of a major crisis such as soaring interest rates and a decline in bond prices or even a stock market crash.

Half of all companies say they are likely to take such defensive actions as cutting capital spending and laying people off if the U.S. government defaults on its obligations, a survey of 305 finance and treasury executives by the Association for Financial Professionals found.

The 30 companies in the Dow Jones Industrial Average are expected to increase their annual dividend payout by 12.66% from a year ago and 2.93% from the first quarter, according to a survey by Dow Jones Indexes.

Putting aside the debt ceiling drama currently playing out in Washington and the dire predictions of what would happen to the U.S. and the global economy if the ceiling isn’t raised by Aug. 2, Goldman Sachs’ chief U.S. economist said that even if all that doesn’t come to pass, the U.S. economy will still slow this year and next and puts the chances of a return to recession somewhere between 15% and 20%.

Institutional investment managers are becoming more cautious, with 42% saying they became more risk-averse in the second quarter, up from 35% in the first quarter, a survey of 100 managers in June by Northern Trust found.

With unemployment rates remaining staggeringly high and debates about the debt ceiling on Capitol Hill, Americans remain worried about the economy, according to a report from First Command.

Now that Standard & Poor's has issued a negative credit watch on U.S. government debt and acknowledged the possibility that no deal will be reached to raise the government’s debt ceiling, what should investors do?

Lawrence Summers, former director of the National Economic Council, recently said, "The central irony of a financial crisis is that while it is caused by too much confidence, borrowing, lending and spending-it is resolved only by increases in confidence, borrowing, lending and spending."