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Implications of the Debt Ceiling Showdown for Investors
On this episode of THE FINANCIAL COMMUTE, host Chris Galeski and Chief Investment Officer Meghan Pinchuk discuss the debt ceiling.
What is the debt ceiling? It is a legislative limit on the amount of national debt the United States government can incur. The government hit the debt ceiling of $31.4 trillion in January, but the Treasury Department provided the government with more cash while it figured out its next steps. Currently, Congress is trying to decide which spending cuts and requirements need to be in place before raising the debt ceiling. Unless Republicans and Democrats come to a compromise by June 1st, the government will default on its debt which could delay social security checks and payrolls, jumpstart a recession, and cause millions to lose jobs.
Even if the debt ceiling is raised, it is a short-term “fix” to a growing problem. A high level of federal debt leads to a more vulnerable economy, higher interest rates, and a more volatile stock market. So, what should people be doing to protect themselves? Meghan says investors should prepare a resilient portfolio with lower stock exposure and consider investing in gold and private lending.
As for the government’s solutions, Chris says there are only two ways for it to pay off its debt: raise taxes or let inflation rise so the real value of the government’s debt is reduced. Although it is a possibility that a temporary government shutdown could happen as Congress tries to reach an agreement, Meghan and Chris are optimistic that the debt ceiling will eventually be raised.
Disclosure:
Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.
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By Chris GaleskiOn this episode of THE FINANCIAL COMMUTE, host Chris Galeski and Chief Investment Officer Meghan Pinchuk discuss the debt ceiling.
What is the debt ceiling? It is a legislative limit on the amount of national debt the United States government can incur. The government hit the debt ceiling of $31.4 trillion in January, but the Treasury Department provided the government with more cash while it figured out its next steps. Currently, Congress is trying to decide which spending cuts and requirements need to be in place before raising the debt ceiling. Unless Republicans and Democrats come to a compromise by June 1st, the government will default on its debt which could delay social security checks and payrolls, jumpstart a recession, and cause millions to lose jobs.
Even if the debt ceiling is raised, it is a short-term “fix” to a growing problem. A high level of federal debt leads to a more vulnerable economy, higher interest rates, and a more volatile stock market. So, what should people be doing to protect themselves? Meghan says investors should prepare a resilient portfolio with lower stock exposure and consider investing in gold and private lending.
As for the government’s solutions, Chris says there are only two ways for it to pay off its debt: raise taxes or let inflation rise so the real value of the government’s debt is reduced. Although it is a possibility that a temporary government shutdown could happen as Congress tries to reach an agreement, Meghan and Chris are optimistic that the debt ceiling will eventually be raised.
Disclosure:
Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.