What is the U.S. debt ceiling? It’s simply a dollar cap limit that the US Government places on its own authority to raise money by issuing government bonds to continue to meet its obligations like social security payments, tax refunds, interest payments on existing debt, government employee salaries, military salaries, just to name a few. Since 1917, Congress has raised the debt limit 78 times (See Citation 1).
In last quarter’s commentary, we addressed inflation as an increasing headwind on the stock market. Just how much inflation is in the offing and whether it is transitory (i.e. – temporary and manageable) has been the hot public debate in financial circles during the second quarter. Anecdotally, I’ve heard from many of you about the rising cost of 2 x 4’s, tires, used cars, gasoline, and even Burger King chicken sandwiches. I paid $4.09 for an order of large fries at McDonald’s in Moorhead this week! Perhaps the only real takeaway there for me is that by making better diet choices, I could help stave off inflation.
Can stocks and interest rates go up at the same time? Yes, they can, and they often do. Right now, we are in a period of recovery from economic shutdowns across the globe. As companies are forced to raise prices in 2021 and meet a return in consumer demand, we are watching inflation like a hawk. Specifically, we pay very close attention to the 10-year treasury note yield as our sentiment barometer.
Phew! We soon will be able to put 2020 behind us. The financial markets have been just as abnormal as most other facets of our lives this year. All the relevant U.S. stock indices endured the fastest bear market declines in history…just 16 days! It was swift and severe, yet short-lived, as the markets repaired most of the damage in the form of a V-shape pattern despite most Wall Street “experts” predicting an L-shaped recovery.
A new client recently asked me what I felt was more important – financial planning or investment management. To some extent, they intertwine. Still, it’s a valid question that deserved an honest answer.
Hello friends, Social distancing affords a person a lot of time to reflect on life, doesn’t it? This time spent at home with family has been a great blessing. Life’s pace has slowed down, and that’s the solace I didn’t know I needed. I hope you’ve found your own moments of solace amidst this abnormal reality, as well.
