Wall Street is hoping for a deal this week between Congressional leaders and the Biden Administration over the debt ceiling crisis. Both sides are set to meet on Tuesday, after a previously scheduled meeting was postponed from Friday . Worry has persisted that a deal may not be agreed upon before June 1, which is the earliest date the Treasury Department has signaled that the U.S. could default on its debt obligations. But if a deal is brokered from the Tuesday meeting, markets could rally on the news and historically a swathe of sectors have gained in the months after a debt ceiling crisis was solved. Morgan Stanley Research compiled data to examine sector performance before and after a debt ceiling negotiations in 1996, 2011 and 2013. Here are some of the best sectors month, two months, three months and six months after a deal on the debt ceiling was reached. History shows that tech performs well in the months after a debt ceiling crisis. The sector climbed 4% in the month that followed the last three debt ceiling negotiations on average. When expanding further out, though, tech was the strongest performer on Morgan Stanley’s list. Tech added 8% and 11% three months and six months after previous debt ceiling negotiations, respectively. The S & P 500 , meanwhile, moved a little higher with a 1% gain one month after debt ceiling talks wrapped in the past three historical comparisons. The index lost 1% two months after, but ultimately gained 7% six months later. Gold outperformed the overall commodities sector from the Morgan Stanley list, with a gain of 8% in the immediate aftermath of debt ceiling resolutions. Bullion declined 1% two months after an agreement was met, on average, and was 3% higher six months from a deal being reached. The commodities sector is historically less of a standout. One month and two months after previous agreements over the debt ceiling, the sector lost 1% and 5%. Over a six month period, commodities were only able to notch a 2% gain. Still, Biden and Congressional leaders could leave Tuesday’s meeting once again at odds . Biden has maintained that raising the debt ceiling is non-negotiable and has echoed an unwillingness to attach an agreement to avoid default with spending cuts. House Republican Speaker Kevin McCarthy has pushed for an agreement over raising the debt ceiling to be in concert with cuts to government spending. “Ultimately, prior comps are limited and do not provide a clear answer, in our opinion,” Morgan Stanley equity strategist Michael Wilson said. “That said, debt ceiling risks are an important part of the market mosaic at a time when investors are looking for any piece of news to disrupt range-bound price action.” Wilson highlighted the utilities sector as one of the better performers heading into debt ceiling negotiations, before a deal was yielded. So you could see that sector outperform further if Tuesday doesn’t result in a deal.
