JPMorgan analyserer virkningen af den enorme forværring af det amerikanske budgetunderskud og statsgælden – der kommer på niveau med forholdene efter Den anden Verdenskrig, altså som en krigsøkonomi. Kombineret med virkningen af coronakrisen, kan det føre til højere renter, som gør det dyrere for staten at servicere sin gæld, og som derfor tvinger regeringen til at øge skatterne og skære ned på de offentlige udgifter. Det får konsekvenser for investorerne, for den udvikling kan føre til lavere indtjening i virksomhederne og dermed lavere afkast på aktier og obligationer.
Thought of the week
Last Wednesday, the Congressional Budget Office (CBO) released its update to the budget outlook, detailing the state of the U.S. federal finances.
The report revealed a sharp deterioration in public finances due to the fiscal response to the economic damage caused by COVID-19. The CBO estimates that the budget deficit will triple in 2020 to $3.3 trillion from $984 billion in
2019, pushing the budget deficit as a share of GDP to 16%, the highest since World War II.
Thereafter, however, the deficit should fall because many of the spending
increases are one-time expenses. However, the debt should still rise because at the end of each fiscal year, the deficit is added to the national debt.
As shown in this week’s chart, the net debt as a share of GDP is projected to rise to 98.2% in 2020 (also the highest since WWII) and increase to 109%
by the end of the decade, an all-time high.
A combination of still significant government stimulus in the form of big
budget deficits and a possible faster post-pandemic economic recovery could
boost inflation. Even with the Fed’s average inflation targeting framework, higher inflation should eventually result in both Fed tightening and higher long-term interest rates.
These higher rates would make it more expensive for the government to service its debt. This may force difficult decisions to raise taxes and cut spending, and investors should recognize that this could lead to lower after-tax corporate profits, slower growth and more muted equity and bond returns in the medium term.
