Local market watchers say it's not panic time – yet

As anxiety builds in Washington, D.C., over the debt ceiling, investment firms are telling their clients not to let worry turn to panic.

"The market and a lot of investors — unfortunately or fortunately, depending on how you look at it — are used to a certain amount of government dysfunction," said Dean Junkans, chief investment officer for Wells Fargo Private Bank. "They've seen this movie before."

Several investment advisers in the Twin Cities said Monday that they are fielding more questions from nervous clients as Thursday's deadline to raise the debt ceiling gets closer. So far, their advice remains simple — don't make drastic moves even if the stock markets start to buckle over the next few days.

"As ugly as it is in Washington, you shouldn't cut off your own nose to spite Washington's face," said Nate Wenner, an investment adviser for Wipfli Hewins in Edina. "People are angry. They're frustrated. But they know better than to sell out of stocks when things are temporarily down."

Senate leaders signaled Monday that they were drawing closer to a deal to raise the debt ceiling and end the government shutdown. The optimism spurred the Dow Jones industrial average to close in positive territory.

The Treasury Department set a deadline of Thursday for Congress to raise the debt ceiling, warning that it would no longer be able to meet all of the nation's financial obligations. Even so, that doesn't necessarily mean default would be immediate if a deal isn't reached.

Revenue will continue to flow to the Treasury, which doesn't have to pay its bills all at once. The Treasury has about $30 billion in cash on hand per day, and it won't reach the point where it can't pay some bills until somewhere between Oct. 22 and Nov. 1, according to the Bipartisan Policy Center.

If the government were in fact to default on its interest payments and stop paying some of its bills, the rhetoric would no longer be hyperbolic, many economists and investment groups say.

"If we were to get into next week and this still be pending, I will tell you that the capital markets would respond violently — to the down side," Russell said. "We wouldn't be the only set of capital markets that would respond that way. I think Europe would respond that way. I think the Far East would, as well."

But the investment community doesn't appear to believe Congress will allow that, so most investors have stayed relatively calm.

Kevin O'Laughlin, a financial planner at Affiance Financial in St. Louis Park, said that clients have witnessed congressional brinkmanship a few times in recent years and that they aren't panicking. "It's in large part because there is that consensus that, as challenging an issue as this may be, and as much struggle as our lawmakers may be having with it, there will be a calmer-heads-prevail sort of solution and we'll get through it," said O'Laughlin, a board member for the Financial Planning Association of Minnesota.

As long as clients have their money invested in a diverse portfolio, with cash on hand for emergencies, they should be able to withstand the ups and downs of the market, he said.

"I think they're anxious, but they're not anxious to the point where they're taking any action that would derail their long-term investment plan, or at least they're not taking any material action," said Junkans, who is based in Minneapolis.

Investor resolve could be tested this week, though, if a deal isn't struck by the end of the day Tuesday. "Then I think the market gets very volatile the next two days," Junkans said.