IMPORTANT DISCLOSURE INFORMATION
The following presentation by New England Capital Financial Advisors, LLC (“NECFA”) is intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from NECFA or any other investment professional of your choosing. Please see additional important disclosure at the end of this penetration. A copy of NECFA’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.newenglandcapital.com.
The Looming Debt Ceiling
You may have heard that back on January 19th that the U.S. hit its $31.4 trillion debt ceiling, and since then, the U.S. Treasury has been using "extraordinary measures" to keep paying its bills.1 It sounds ominous, but how concerned should you be?
Deficit spending is nothing new. The U.S. has run annual deficits for most of its history. The last time the nation brought in more money than it spent was in 2001. In the wake of the pandemic, the national debt has increased by more than $8 trillion since late January 2020.1
As in the past, the debt ceiling has become a political issue. Republicans, now in the majority in the House, are pushing for spending cuts as part of any agreement to raise the debt ceiling. President Biden and Democrats in the Senate have vowed to fight major spending cuts. In the meantime, the extraordinary measures being taken to keep paying the government's bills could run out before July.
It's important to remember that in past partisan fights, Congress had consistently raised the debt limit when push came to shove. In fact, since 1960, Congress has acted to raise, extend, or revise the debt limit 78 times. 2 If you do the math we are still batting 1000 as we are 78-78 up to this point on getting a deal done!
What would happen if the debt limit wasn't raised?
Failing to increase the debt limit would cause the government to default on its obligations. This has never happened before and is unlikely to happen this time.
The closest the U.S. ever came to defaulting was in 2011 when Congress eventually reached a compromise. This current drama will likely play out over the next few weeks, so be prepared for more headlines on the subject. Ultimately, Democrats and Republicans know that a default would have repercussions across the global financial markets, so while we cannot predict the future, we can be confident that Washington will go to great lengths to reach an agreement.3
Markets don't like uncertainty.
Financial markets don't like uncertainty, and the debt ceiling joins the list of other dynamics that can affect the markets, such as the economy, inflation, and interest rates. As a result, we may see continued volatility.
As your financial professionals, we're here to handle whatever the markets throw at us. If you have questions, we’re a phone call or email away.
1 WSJ.com, February 15, 2023
2 Treasury.gov, 2023
3 Investopedia.com, February 26, 2023
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by New England Capital Financial Advisors, LLC [“NECFA”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from NECFA. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. NECFA is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the NECFA’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.newenglandcapital.com. Please Note: NECFA does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to NECFA’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a NECFA client, please contact NECFA, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.