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From Kirsten Bischoff, Opalesque New York:

While the US markets stayed relatively calm (with regard to the looming debt ceiling debacle) in the leadup to this week, Wednesday’s 2% drop may have marked a turning point, and hedge fund managers have been stress testing their funds to see what danger may be lurking around that August 2nd corner. Whipsawing has been a fact of market life throughout 2011, but even the chance of a US default has shown that the markets will be especially sensitive until a rock solid deal is announced (if that in fact, ever happens).

Those managers that Opalesque has spoken with over the past few weeks have been relatively non-committal to what might happen in the leadup to next week’s possible crisis. Genrally speaking, it seems as though most were not seriously considering default as a possibility. The US hedge fund industry has been notoriously aggravated by Washington politicians as of late, with former staunch Obama supporters showing their disdain for the President’s administration and many continuing to fund both Republicans and Democrats while simultaneously expressing frustration at both parties.

But the general feeling (even globally) has been that a deal will be reached. As one participant in the soon to be released London Roundtable commented, "No American politician is going to vote for a debt cap, because being the guy who brings down the financial system is not going to win you votes." However, the ongoing ......................

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