 Hey everyone, this is Dan. According to Treasury Secretary Janet Yellen, the U.S. government is approaching its ceiling on debts. If the ceiling is not raised by the Congress before June 1, 2023, the government might not be able to pay its employees or might even default on its debt payments. Many prominent figures in the financial sector, including JPMorgan Chase CEO Jamie Dimon also issued warnings about the danger of the U.S. government defaulting on its debts if the debt ceiling is not raised. Many people are worried that the stock market will collapse if the U.S. government default happens in the next few weeks. Are those concerns about the market justified? How bad would it get if the debt ceiling is not raised by June 1? We actually went through the same chapter in 2011 and 2013 when the Congress was laid in raising the debt ceiling. The stock market did drop in 2011 and 2013. Let's do a deep dive into those years to see how much the stock market dropped, as the Congress and the administration bickered over the debt ceiling. Let's look at 2011. The candlestick line here is the S&P ETF SPY. The green line here is the NASDAQ 100 ETF QQ. We can see that there is a big dip on the chart. Let's put the chronological events of 2011 on this chart. On April 18, S&P issued a negative outlook on the U.S. AAA Sovereign Debt Rating. Then on May 16, U.S. Treasury declared a debt issuance suspension period and utilized quote extraordinary measures and quote to acquire funds to meet federal obligations that did not require the issuance of new debt. On July 14, S&P issued a research update putting the U.S. debt on a 90-day credit watch. Then on July 16, Egan Jones Rating Company which is a smaller credit rating agency cut its rating for the U.S. government from AAA to AA+. On August 2, the budget ceiling was lifted finally after the House passed the Budget Control Act on August 1 and the Senate passed the same Act on August 2. But on August 5, S&P downgraded U.S. Sovereign Debt 1 notch from AAA to AA+, with a negative outlook. On August 8, following the announcement on Friday August 5, all three major stock indices declined between 5 and 7% in just one day. That was a big drop. As you can see, the big drop of the stock market did not happen until S&P downgraded debt rating of U.S. Sovereign Debt. If you like what you've seen so far, I'd like to suggest for you to click the like, subscribe and notification buttons because that will enable you to receive notification when I post my next video. It will also encourage me to make more videos like this in the future. We have a lot of important stuff to cover. Let's continue. Between the maximum in May and the minimum in August of 2011, SPY dropped 17% and the NASDAQ 100 ETF QQ dropped 15%. Those were pretty steep drops. In 2013, we ran into the debt ceiling problem again. The U.S. government actually had to begin a partial shutdown on October 1 in order to reduce expenses. On October 16, the Senate passed the Continuing Appropriations Act to fund the government until January 15, 2014 and suspending the debt ceiling until February 7, 2014, thereby ending the 2013 government shutdown and debt ceiling crisis. On October 17, the following day, DAGON Global Credit Rating downgraded the United States from A to A- and maintained a negative outlook on the country's credit. However, unlike the 2011 S&P downgrade, the DAGON Global Downgrade did not make a dent in the market. Between the peak in September to the bottom of October 2013, SPY dropped 4.3% and QQQ dropped 3.2%. The drop was nowhere nearly as severe as 2011. Maybe that's because a major rating agency like S&P had not downgraded U.S. sovereign debts in 2013. What are the credit ratings for U.S. sovereign debts today? S&P's credit rating for the United States stands at double A-plus with a stable outlook. S&P has not downgraded U.S. sovereign debts since after the 2011 downgrade. Moody's credit rating for the U.S. was last set at triple A with stable outlook. Triple A is Moody's top rating. Fitch's credit rating for the U.S. was last reported at triple A with stable outlook. Triple A is also Fitch's top rating. DBRS's credit rating for the United States is triple A with stable outlook. Again, triple A is DBRS's top rating. Overall, the U.S. credit ratings today are pretty good. To understand a big picture, we need to be aware of a few historical events. As you might recall from a few pages ago, on August 5th, 2011, S&P downgraded U.S. sovereign debts one notch to double A-plus with a negative outlook. Then on August 17th, New York Times reported that the Justice Department was investigating whether the nation's largest credit rating agency, Standard & Poor's, improperly rated dozens of mortgage securities in the years leading up to the financial crisis of 2008. Some people felt that this investigation was in retaliation to S&P downgrade of U.S. government's credit rating in 2011. Then on August 22nd, S&P replaced its president, Devin Sharma. Finally, four years later, on February 3rd, 2015, the Justice Department and state partners secured $1.375 billion settlement with S&P for defrauding investors in the lead up to the financial crisis. Coincidentally, S&P never downgraded U.S. debts again since after 2011. In my opinion, it is not likely for a major credit agency like S&P to downgrade U.S. debt in 2023 unless a few catastrophic events happen. What are those catastrophic events that could lead to a downgrade by the S&P? First, if the government goes through a partial shutdown for more than three weeks. Why three weeks? That's because 2013 partial shutdown lasted 15 days and that did not result in a credit downgrade back in 2013. Another catastrophic event would be if the government defaults on some of its debt payments. Historically, the U.S. government has never defaulted on its debt payment. In my opinion, in the next two to three weeks, S&P is not likely to drop more than 5% from today even with the debt ceiling issues. What are my investment strategies? I sold some of my long positions on May 16 to lock in profits because I expected some last-minute suspense in the debt ceiling negotiation between the Biden administration and Republican congressional leaders. Now, if the debt ceiling is lifted in the next few days, before June 1, I will buy long positions such as SPXL, T-TQQ, ASML, AMD, Alphabet, or MVO, which is Novo Nordus, a pharmaceutical company, because I expect the stock market to shoot up if the debt ceiling is lifted. If the debt ceiling is not lifted by June 1, I might short the market by buying SBXS or S-TQQ, and I will update my Twitter subscribers almost on a daily basis about my trades and about the latest development. At this point, I'd like to suggest that you're subscribed to my Twitter account, which is DanMarketL. I've been providing my Twitter subscribers frequent updates on important news related to the stocks that I follow. I also share with my Twitter subscribers about some of my trades. For example, on April 25, because Microsoft and Alphabet beat earnings estimates, I bought SPXL aftermarket at 3% below my sell price on April 17. And then two days later, I sold three quarters of the SPXL share at 3.5% gain. And then on May 16, I sold the SPXL shares I bought on May 11 at 1.1% gain. I also sold ASML shares at 2.2% gain and sold NVIDIA shares at 9.9% gain. I mentioned that the market rebound on that day might fizzle out if the debt ceiling is not raised by June 1, 2023. That's why I was taking profit on May 16. Thank you for watching all the way here. I'd like to remind you again to click the like, subscribe, and notification button. And as usual, I very much welcome your comments, questions, and suggestions. I'd like to remind you that I'm not a financial advisor. I share my stock trading strategies and analyses for educational and entertainment purposes only. If you want to buy or sell stocks, you should make your own decisions and you should definitely consult with your financial advisors before you do so. That wraps up my video for now. I will chat with you again in the next few days. In the meanwhile, I'd like to wish you the very best of luck with your financial investments.