05 Jun The risk of a US public debt crisis – and implications for shares
Key Points
- US tax cuts point to ongoing budget deficits around 7% of GDP, a rising trend in already very high public debt and a further rise in already record debt interest payments.
- While a full-blown US public debt crisis is unlikely, this along with declining foreign investor confidence in US policy making could mean upwards pressure on US bond yields.
- In the near-term shares look like they will break to new highs. But the risk of further tariff and US public debt worries driving another bout of weakness is high.
- It’s possible the $US is losing its ‘safe haven’ status. This means the $A may behave a bit less as a shock absorber in a crisis, meaning more pressure on the RBA to cut rates than might normally be the case.
