It's not an immediate question of the US defaulting. More an issue of declining credit standing causing investors to demand higher rates, which increased the debt burden, and requires more "money printing" more money supply more inflation, more concerns, higher rates, more "money printing" etc etc..Deep Blue wrote: ↑Fri Jul 26, 2024 10:18 pmIf you’re worried about the US government defaulting on its debt then you want farmland, guns and a stable water supply rather than gold. Get prepping!ToushiTime wrote: ↑Fri Jul 26, 2024 12:27 pmInflation has been relatively muted and short-lived compared to previous decades. As you know equities have mainly been driven by the big Tech stocks due to AI expectations over the past 2-3 years, which has disguised weaker performance by the other companies. Likewise interest rates have been super low for the past 20 years. They are still low by historical levels, and yet debt and spending is a major concern for many economists and investors. Check those links I posted by Ray Dalio, or recent articles by Bill Gross, or many other commentators that believe bonds are not the hedge they once were due to massive debt levels.Deep Blue wrote: ↑Fri Jul 19, 2024 3:04 am
We've just had a period of some of the highest inflation rates in decades, over the last 2-3 years. Consumers have cut back on spending - has this held equities back from making record profits and delivering stellar returns for investors?
We've just seen the highest interest rates in most of the developed world for twenty years. Has this hurt equities? No.
If you are worried about deflation, buy bonds. If you are worried about inflation, buy equities. Gold offers nothing - it just sits there, earning no returns and hoping for a Greater Fool to come along and pay more than someone else did yesterday. That's not my sort of investing.
By the way, people have been fretting about developed countries debt loads for decades now. If one had sat out investing in equities during that time then the result would be suboptimal for one’s personal wealth. What makes you think the next few decades will be different?
Much more likely is the debt is inflated away, as we’ve seen countless times in history. In this environment, equities for the win.
As you know, US debt has already been downgraded by ratings agencies.
Yes, the US will have to endure painful tax increases and/or tax cuts which will hurt equities, or long sustained inflation to reduce its debt load, given how much debt has built up. Labor shortages due to unprecedented population aging will exacerbate that inflation through higher wages.
Debt build-up over the past few decades was not so much an issue when interest rates were low. This makes me think the next few decades very well could be different.
Equities don't do well during stagflation. Nor do bonds.
I'm not against equities at all. They make up 75% of my portfolio. I am just saying have a mix of assets with different correlations - not just bonds, given these issues- helps.