If The Debt Ceiling Issue Were To Go Away...

A few days ago we posted this paragraph from BTIG's Dan Greenhaus about the outlook for the market:

In a recent conversation with one of our hedge fund manager clients, we were pressed on our views (which we will expand on tomorrow). As we said then and repeat here, we think the outlook for equities is somewhat good but we remain laser focused on the debt ceiling. As such, a hedged position is probably warranted, something BTIG’s option team notes can be achieved simply through cheap March put spreads on the SPY. However, such a view -- favoring hedges -- is probably part of the reason Goldman Sachs noted 88% of hedge funds underperformed the S&P 500 in 2012. But with the President set to nominate Jack Lew to Treasury Secretary (Republicans really don’t want him) and with the looming debt ceiling standoff, we just wouldn’t feel comfortable with another position, even as the argument for market participants getting more comfortable with Washington dysfunction grows with each successive standoff.

This is what everyone is thinking these days.

If it weren't for the debt ceiling, then the bullish case would be very easy. China isn't hard landing. Europe isn't in acute crisis. The US has plenty of positive tailwinds (housing notably). Meanwhile, retail bullishness continues to grow.

It's far too early to say how the debt ceiling will wind up, but some on Wall Street are already thinking it won't be the horrible standoff like we saw in 2011 if that happens, you'll have to recognize how lopsided the pro-bull argument is vs. the bearish one.