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Trump, Biden and the other thing
I am NOT politically-motivated in anything I write for investment purposes, so that headline is the only mention I will make of the presumptive GOP and Democratic candidates for US President. That debate last week between them has dominated media coverage, and bled strongly into market punditry as well. Because policy in Washington DC does impact markets, especially when it comes to taxes.
But in addition to the one guy and the other guy everyone is talking about, there’s that other thing. THE DEBT. And one thing that all major US political parties can agree on: we can’t ever have enough of it! That’s how we got here:
That snapshot from this very cool website just does not do it justice. I’m only showing you a fraction of it here, but if you link to or look up USDebtclock.orgyou can see all the gory details. This actually takes me back to my time as a young Wall Streeter, when I’d pass by the running debt clock on my way to work in Manhattan (New York, not Kansas). But to tackle this debt is not as simple as inflating it away or letting it continue to build, though the latter is the most likely case I think.
The issue is not whether the debt will crush our economy and the proverbial chickens will come home to roost, destroying the US Dollar’s supremacy and throwing the world economy into a great depression. I can’t possibly predict anything like that with accuracy.
But what I can conclude is that this will increasingly constrain the ability of whoever is in charge of the US Congress (which ultimately governs the spending) to enact growth-oriented policies. THAT is the intermediate term to long-term risk. Not the debt we have, but how it limits economic growth potential, which in turn weighs on the stock market.
So as it turns out, 2025 might be a rough year for whomever gets the job.