As the investment world still comes to grips with the Fitch Ratings decision to downgrade the U.S. debt rating, here’s an eye-popping statistic: the U.S. government’s debt will rise by $5.2 billion — every single day for the next decade.
That’s according to the latest missive from Bank of America strategist Michael Hartnett, in which he references Congressional Budget Office projections to come up with the number.
See: Congressional Budget Office paints grim long-term U.S. deficit picture
Importantly, debt is set to grow much faster than the broader economy. On the CBO’s numbers, the debt held by the public will reach 118.9% of GDP by 2033, up from 98.2% this year.
Hartnett says central banks are still in the business of bailing out Wall Street, and governments are very much in the business of bailing out Main Street. “Ultimately policy destination is yield curve control across G7 once next recession provokes fiscal policy panic and ever high government default risk,” he says.
It should be noted that the one major economy with yield curve control, Japan, is starting to take baby steps to get out of it. The U.S. had yield curve control during World War II, and it’s a policy that has been considered more recently by Federal Reserve officials.
Since the debt-ceiling resolution in Congress on May 31, commodities have been the best performing asset, Hartnett points out. The main catalyst is a lack of recession but a combination of supply factors are also helping — including the lowest U.S. oil inventories since 1985, India’s rice export ban, China’s export restrictions on germanium and gallium, Russia and Saudi Arabia’s oil supply cuts and the military coup in uranium-rich Niger.
His analysis of Bank of America’s private clients is that they’re shifting to a risk-off mode, as the past two weeks has seen the strongest inflows into bonds since October 2022, and the second straight week of equity outflows. These clients are buying investment-grade debt, Japanese stocks, volatility products and selling growth stocks, bank loans, financials and tech exchange-traded funds.
This story originally appeared on Marketwatch
