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Politicians have the uncanny ability to do absolutely the wrong thing at the wrong time. See the initial voting down of the Troubled Asset Relief Program (TARP) a couple of years ago. That is why the deadline for raising the debt-ceiling may pass without an initial solution. That said, should the markets drop, politicians also have the uncanny ability to do the right thing when their reelection is in jeopardy. This is why we would view a drop in the stock markets as a buying opportunity. One caveat, there appears to be more idealogues at the fringes on both sides of the aisles. These are the wildcards that, despite a drop in the markets, may nonetheless hold their ground.
We have several plans of action that range from holding conservative assets that we believe will not be impacted by any debt default to holding cash. What we choose to do for our clients depends upon their objectives, time frame and tolerance to risk.