How does the US Federal deficit affect my investments?

February 3, 2023

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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