Keeping an Eye on the Debt Ceiling
As your wealth manager, the debt ceiling is definitely something we are keeping an eye on. The debt ceiling is the legal limit on the amount of money the United States government is authorized to borrow to meet the country’s committed spending obligations. Once this limit is reached, the government cannot borrow any more money.
Defaulting on the Government’s debt obligations can lead to a default on government bonds, which would have serious consequences for financial markets.
The debt ceiling has been a point of political contention in the past, and there have been instances where the government has come close to defaulting on its debt obligations. In these situations, financial markets have become more volatile.
However, it is important to keep in mind that the crisis in raising the debt ceiling is not a new phenomenon, and the government has successfully raised the debt ceiling 78 times since 1960. While there may be short-term volatility in financial markets, it is unlikely that the government will default on its debt obligations, as this would likely result in higher borrowing costs, a spike in unemployment, disruption in services, and more.
That being said, this is a perfect example of why we place so much importance upon diversifying your portfolio to ensure you are taking the appropriate risk for your personal situation. We will continue watching the events surrounding the debt ceiling very closely and if we believe there is any plausible scenario that threatens your portfolio, we will act.