Profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal - March 3, 2009 President Obama.
There maybe legitimacy within his concern. His political machine knows how many votes are needed. They see the day-to-day interaction. Whether you like President Obama or not, his reputation as a straight shooter is firmly intact, and he just warned each and every investor of a shit-storm potentially brewing.
The market is in no way discounting for a debt disruption via the treasuries. Not by a mile.
If the debt ceiling is not passed, and the US has a default on its debt (the only risk-free modeled debt still in existence) the markets will collapse. They will collapse hard. Let me repeat that:
Treasury default = collapse of equity markets.
It will create so much havoc on the markets equity investors do not see, that everything will get fucked up.
There is no such thing as a "technical" default either. The US already experienced an inadvertent "technical" default in the late 70s. The mistake was quickly fixed, but rates remained elevated for a long time. Given that a default would not be fixed very quickly, and the economy (especially the emerging market economies) are currently relying on low rates, a "technical" default will be very bad.
Expect a 15-20% drop in equities if the US defaults, a persistently discounted market thanks to elevated rates, and a global economy that may actually contract.