Navigating Volatility and Uncertainty in the US Debt Crisis

Investors are preparing for potential spikes in currency volatility and losses in equities as the US struggles to reach a debt-limit deal. The uncertainty surrounding the Federal Reserve's next policy decision in June has already added to market volatility. Strategists at JPMorgan Chase & Co. and Morgan Stanley have warned that an impasse threatens the outlook for equity markets, while traders have also piled into swaps and options for major currencies to hedge their portfolios. The back-and-forth between lawmakers has Wall Street preparing for the worst, with executives in trading, corporate and consumer banking in the nation’s three biggest lenders trying to predict how the government’s failure to pay bills would cascade through markets.