Goldman economist Alec Phillips weighs in on the big, upcoming events in Washington DC (Syria, debt limit, budget, Fed nomination).
This is a useful approximation for how Wall Street expects a very chaotic coming month to go:
The congressional debate on authorizing the use of military force in Syria will be first on the agenda, with a vote as soon as September 4 in committee, and passage in the House and Senate possible late in the week of September 9.
Beyond the direct implications of authorizing force, we believe this may also have two indirect implications: first, it increases the already high likelihood that Congress will approve a temporary extension of spending authority, avoiding a partial government shutdown. Second, it makes it slightly more likely that Congress will provide partial relief from the spending cuts under sequestration, though our base case is that they remain in place.
The remaining items on the agenda–the debt limit and the nomination of the next Federal Reserve chair–will probably be less affected by the ongoing congressional deliberations on military action. The timing of a presidential announcement regarding the Fed chair remains unclear but an announcement in late September–after the FOMC meeting but before the debate on the debt limit–seems most likely to us.
Regarding the debt limit, we do not expect a repeat of the highly disruptive 2011 experience, but Congress seems unlikely to raise the limit with much time to spare, so some volatility shortly before the deadline seems likely.