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How does the US Federal deficit affect my investments?

  • As of the end of 2020, the US debt held by the public amounted to $22 trillion, an increase of approximately $5 trillion from the year before and well over double the level from a decade ago.1 This trend may be worrisome for investors expecting an adverse impact on stock returns once the bill for all this spending comes due.
  • The US has hardly been alone in its recent escalation of debt. Exhibit 1 shows that roughly half the Organization of Economic Co-operation and Development (OECD) member countries had general government debt-to-gross domestic product2 (debt/GDP) ratios above 70%, with 10 countries—including the US, Japan, and the United Kingdom (UK)—exceeding 100% as of 2020.
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