The financial markets are experiencing a sell-off this morning, with no signs of a compromise on the debt ceiling issue. President Biden and Speaker McCarthy recently met, but progress remains elusive, despite the speaker’s claim to the contrary. Increasingly, there are calls for the 14th amendment to be utilized as a potential solution. Meanwhile, Janet Yellen, the Secretary of the Treasury, warns that the nation stands on the precipice of default. The market detests uncertainty, and the situation is further complicated by Ben Bernanke, the former Chairman of the Federal Reserve, asserting that the FED has not done enough to control inflation. Although the FED may be seen as less receptive to input, the perspective of an experienced former chairman, who guided the nation through the Great Recession, holds significance. In any case, a government default and higher interest rates would pose challenges for the economy and the stock market, generating continued uncertainty until Washington reaches a resolution.
As a fiscal investor, it is crucial to prioritize investments that consider quality, value, and long-term prospects. While this situation will likely be resolved soon, it is important to acknowledge the existence of two significant negatives that can impact the economy. Under these circumstances, purchasing short-term treasuries could be a prudent move. For instance, a 1-month treasury is currently yielding approximately 5.87%, presenting a decent yield and high liquidity. Even in the event of a US default, the likelihood of recovering one’s investment remains considerable likely. It is essential to recognize that failure to do so would indicate more profound systemic issues. However, we would recommend you read “Seizing Opportunities! Why Now?” There is risk but with a long-term vision, time will be the winner with quality and value. There are some great values out in the market.
During this period, it is wise to maintain a long-term perspective and ensure that personal finances are in order. Running up debts with high interest rates is ill-advised in the current climate. By prioritizing stability and prudent financial management, individuals can navigate this uncertain environment more effectively.