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<ul class="summary-list"><li>The S&amp;P 500 might be stuck in place for the rest of the year, Ed Yardeni says.</li><li>The market vet thinks no more Fed rate cuts are coming until 2025 as the economy stays strong. </li></ul>The stock market could be bumping up against a ceiling for now, market veteran Ed Yardeni said. The longtime investor and president of Yardeni Research said he sees limited capacity for central bankers to cut interest rates, thanks to the strength of the US economy and a troubling outlook for the federal debt balance. That means further policy easing may not come until 2025 — and the S&amp;P 500 could stay stuck around 5,800 through the end of the year, he said in a recent note to clients. That would imply less than a 1% gain for the benchmark index in the next two months. Stocks have already been going "nowhere fast" since the Fed issued a jumbo-sized rate cut in September, Yardeni said. The S&amp;P 500 has climbed 2% since the Fed's last policy meeting, while the S&amp;P 500 equal-weighted index has risen 3.8%."We expect that it might go nowhere fast over the rest of this year too, hovering around 5,800. The outlook for fiscal policy will probably remain unsettling after the election and the Fed might not lower the FFR over the rest of this year after all," Yardeni wrote.Yardeni pointed to strength in recent economic data, which suggests that further rate cuts might not come out of the Fed's meeting this week or in December. For one, real GDP growth was strong in the third quarter, rising 2.8% year-over-year. Business equipment investment rose 11% over the third quarter, following a near-10% increase in the prior quarter. Investment in information processing equipment, in particular, hit a record high, according to data from the Bureau of Economic Analysis.<div type="image" title="Graph showing business equipment investment growth" height="794" width="1332" msid="114956591" hostid="261" sizebytes="56966"></div><a target="_blank" class="" href="https://www.businessinsider.com/october-jobs-report-unemployment-rate-nonfarm-payroll-growth-federal-reserve-2024-11#:~:text=The%20US%20economy%20added%20just,due%20to%20hurricanes%20and%20strikes.">Weakness in the job market</a> has concerned some investors, with the US adding far fewer payrolls than expected in October. Yet, analysts have said the labor market weakness was at least partly the result of events including <a target="_blank" class="" href="https://www.businessinsider.com/boeing-union-iam-endorses-contract-pay-raise-strike-2024-10">union</a> <a target="_blank" class="" href="https://www.businessinsider.com/dockworkers-port-strike-ila-impacts-2024-10">strikes</a> and <a target="_blank" class="" href="https://www.businessinsider.com/hurricane-milton-helene-unemployment-job-growth-presidential-election-inflation-harris-2024-10">Hurricanes Helene and Milton</a>.Importantly, the unemployment rate remained near a historic low last month at 4.1%."The bond market agrees with our opinion that the Fed cut the FFR too much, too soon," Yardeni added, pointing to the recent rise in bond yields, which indicate higher interest rate expectations among bond investors.Government borrowing, meanwhile, looks poised to increase over the coming months, a factor economists have said could <a target="_blank" class="" href="https://www.businessinsider.com/us-debt-problem-explained-deficit-gdp-inflation-economy-interest-rates-2024-4#:~:text=The%20government's%20soaring%20debt%20balance,future%2C%20economists%20told%20Business%20Insider.">indirectly fuel inflation</a>, and therefore limit the Fed's ability to cut rates."What can we expect when the current debt limit suspension ends on January 2? A divided government could force the Treasury to use extraordinary measures (as it did early last year) to fund the government while Congress debates the ever-increasing debt limit. It may take a debt crisis in the bond market to rein in Washington's fiscal excesses," Yardeni said.Yardeni has warned clients before about the possibility that <a target="_blank" class="" href="https://www.businessinsider.com/interest-rate-cuts-fed-outlook-recession-economy-stocks-ed-yardeni-2024-10">no further rate cuts</a> are delivered by the Fed in 2024. However, most investors expect the Fed to cut rates by 25 basis points this week and cut by the same amount in December, according to the <a target="_blank" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html">CME FedWatch tool</a>. Some forecasters have even floated another <a target="_blank" href="https://www.businessinsider.com/next-fed-rate-cut-forecast-jumbo-unemployment-labor-market-citi-2024-11">jumbo-sized rate cut</a> this year as the labor market could be weaker than it appears on the surface.

Stocks might 'go nowhere' for the rest of this year amid Fed uncertainty and US debt concerns, market vet says

<ul class="summary-list"><li>The national debt has blown past $35 trillion, and it's only going to go up under Trump or Harris.</li><li>Left unchecked, unsustainable deficits will slow GDP growth, decrease savings, and spur inflation.</li></ul>The US has a big, $35 trillion problem: the national debt.After a bout of pandemic stimulus, the <a target="_blank" href="https://fred.stlouisfed.org/series/GFDEGDQ188S">national debt</a> ballooned from an already hefty 103% of GDP in 2019 to 120% currently.Left unchecked, the deficit will continue to creep higher and could drag GDP growth. Too much government spending reduces public and private savings levels, decreases labor productivity, and increases our dependence on foreign investment, according to <a target="_blank" href="https://www.businessinsider.com/immigration-policy-boost-labor-market-national-debt-job-market-taxes-2024-10">Chris Brightman</a>, CEO and CIO of the investment advisory Research Affiliates.<div type="image" title="Federal budget deficits crowd out national saving" height="648" width="1237" msid="114740934" hostid="261" sizebytes="20852"></div>If the US debt continues on this trajectory, Brightman predicts that the US could follow in the footsteps of European economies and see annual GDP growth decline to 1%.<div type="image" title="High spend and national debt associated with slow growth for various countries" height="580" width="923" msid="114740936" hostid="261" sizebytes="20990"></div>That's not to mention that welfare programs like Social Security will be on the chopping block. According to the Social Security Administration, Social Security benefits will be reduced by almost 25% starting in 2034 if nothing is done to address the national debt.<h2 id="ff5f9554-8d16-41da-bb6b-669693d7fe8e">No change in November</h2>Neither Harris nor Trump have a plan to address the deficit.In fact, both candidates are pushing policies that would increase deficit spending. If there's a blue or red sweep in November, government spending levels will be even higher.There are two main ways to reduce deficits, according to Ayako Yoshioka, senior portfolio manager at Wealth Enhancement Group. The first is to grow your way out. By growing the economy at a faster rate, the proportion of debt to GDP decreases."Nobody wants to really think about Plan B. Plan B is either raising taxes or cutting social programs and raising taxes when inflation is high," Yoshioka said.Both of those policies are incredibly unpopular, which is why the candidates haven't said much on the topic.However, growing GDP won't be sufficient to fix the situation, according to Brightman. "The math doesn't work," he said. If GDP continues to grow at its predicted pace of 2% per year, that's not even enough to cover the US government's interest payments on debt, much less reduce the principal amount. Interest costs are projected to reach 3.4% of GDP by 2025, and 4.1% by 2034.<h2 id="c865dcdc-9063-4908-8e2c-e1b6f1e4bae8">How to invest</h2>Until the government takes steps to get the deficit under control, there are a few things investors can do to protect their holdings.Continued high national deficits could put the credibility of US sovereign debt into question, leading to a depreciating dollar and increased inflation.The US government might try to use inflation to chip away at the real value of the debt by pursuing expansionary monetary policies such as quantitative easing, according to Jeff Muhlenkamp, portfolio manager at Muhlenkamp &amp; Company. If the US dollar were to decrease in value, the government could repay the debt more cheaply than when it was first incurred."As the US government continues to get deeper in debt, how are they going to work their way out of that?" Muhlenkamp said. "One of the potential outcomes ends up being a devaluation, and <a target="_blank" href="https://www.businessinsider.com/how-to-invest-in-gold-price-record-highs-safe-haven-2024-10">gold</a> is a nice hedge against that.""Real" assets, or investments backed by tangible resources, are generally a good hedge in a high-debt environment, according to JPMorgan. These investments have direct intrinsic value and tend to store long-term value effectively. Examples include commodities, real estate, and infrastructure. Muhlenkamp likes the energy sector in particular. JPMorgan also recommends increasing exposure to non-US dollar-denominated assets.Avoid long-term Treasurys, Muhlenkamp added."Where you definitely don't want to be is in long-term government debt," he said. "[The government] will inflate away the value of the debt if they can get away with it."Muhlenkamp is predicting that the next decade will see <a target="_blank" href="https://www.businessinsider.com/higher-long-term-inflation-outlook-investing-strategy-attractive-bonds-stocks-2024-10">increased inflation</a>, which will eat away at bond yields.Yoshioka points out that there's also the risk of a failed treasury auction, which is when the Treasury Department doesn't receive enough bids to take on the debt it's trying to sell. If this were to happen, the Federal Reserve would need to step in and purchase the unwanted bonds by printing money, creating more inflation.Some funds that offer exposure to real assets include the iShares US Energy ETF (<a target="_blank" class="" href="https://markets.businessinsider.com/etfs/ishares-us-energy-etf-us4642877967?miRedirects=1">IYE</a>), the Fidelity MSCI Real Estate Index ETF (<a target="_blank" class="" href="https://markets.businessinsider.com/etfs/fidelity-msci-real-estate-index-etf-us3160928574?miRedirects=1">FREL</a>), and the iShares Gold Trust (<a target="_blank" class="" href="https://markets.businessinsider.com/etfs/ishares-gold-trust-us4642852044?miRedirects=1">IAU</a>).

The national debt crisis is set to worsen no matter who wins the election — here's what you can do to protect your portfolio 

<ul class="summary-list"><li>Traders and central banks should increase exposure to gold, Bank of America says.</li><li>The strategists say Treasurys face risks as US debt levels soar. </li></ul>Gold is increasingly attractive as other traditional "safe haven" assets face mounting risks, Bank of America strategists said.The strategists said investors, including central banks, should rotate into the precious metal, which bulls tout as a hedge against inflation and debt debasement resulting from rising government borrowing. "Gold looks to be the last 'safe haven' asset standing, incentivising traders including central banks to increase exposure," the strategists said in a Wednesday note.They explained that with US debt expected to keep soaring, Treasury supply faces risks. At the same time, higher interest rate payments as a share of GDP will make gold an attractive asset in the next few years.Rising spending is alson't merely a US issue. The analyst notes that the International Monetary Fund predicts new spending could amount to 7%-8% of global GDP annually by 2030. "Ultimately, something has to give: if markets become reluctant to absorb all the debt and volatility increases, gold may become the asset of choice. Central banks in particular could further diversify their currency reserves," the analysts wrote. With neither candidate for the upcoming US presidential election prioritizing fiscal discipline and a pullback in spending, national debt is projected to hit a record high as a share of the economy in the next three years, the analysts said.That will increase interest payments as a share of GDP, making gold an attractive asset amid concerns that markets won't be able to absorb new debt, they add."Indeed, with lingering concerns over US funding needs and their impact on the US Treasury market, the yellow metal may become the ultimate perceived safe haven asset," the analysts said.The analysts reaffirmed their target of $3,000 an ounce for gold by the end of next year, which implies 11.1% upside from levels on Thursday. The analysts' bullishness for the metal comes as worries grow over mounting spending and debt around the world. Investors have increasingly looked to gold in recent weeks as the Federal Reserve kicked off its easing cycle with a 50-basis point interest rate cut last month, driving the price of gold to gain around 4.3% in the last month.Central banks around the world have also increased their share of gold as a portion of total reserves. The Bank of America analysts note that gold now makes up 10% of central bank reserves, up from 3% a decade ago.

Gold is the 'last safe haven' as Treasurys face risks from soaring US debt, Bank of America says

<ul class="summary-list"><li>The dollar's dominant role in global reserves and trade is safe, JPMorgan said.</li><li>But the main looming threat is mounting US public debt, the firm said.</li></ul>De-dollarization is only a problem to the extent that the US allows it to be one, according to a recent JPMorgan research webinar.One of the main takeaways was that the biggest threats to dollar dominance are swelling US debt levels and fiscal deficits, which officials in Washington could step up to tackle."The biggest challenge to US dollar dominance is the US itself given the mounting public debt levels and elevated fiscal deficits," JPMorgan said, in a note summarizing the webinar.Offshore demand for US Treasury assets reinforces the greenback's international standing, as foreign investors require the currency to snap up US debt. According to the Peter G. Peterson Foundation, foreign holders accounted for <a target="_blank" class="" href="https://www.pgpf.org/blog/2024/08/the-federal-government-has-borrowed-trillions-but-who-owns-all-that-debt#:~:text=Foreign%20ownership%20of%20U.S.%20debt,or%2029%20percent%2C%20of%20DHBP.">29% of publicly held federal debt in December 2023</a>.But this can shift if federal debt loses its allure, some <a target="_blank" href="https://markets.businessinsider.com/news/currencies/de-dollarization-dollar-war-currency-usd-dominance-china-yuan-economy-2024-5">caution</a>.Though Treasurys are attractive for their safe-haven repute, several analysts voiced concern that this is at risk. US spending has shot up since the pandemic, and the <a target="_blank" href="https://www.businessinsider.com/us-debt-outlook-56-trillion-cbo-government-budget-deficit-gdp-2024-6">current deficit amounts to around 6% of GDP</a> — far more than the 50-year average of 3.7%.Meanwhile, the <a target="_blank" href="https://www.budget.senate.gov/ranking-member/newsroom/press/cbo-national-debt-to-reach-record-share-of-gdp-in-just-three-years#:~:text=Debt%20held%20by%20the%20public,percent%20of%20GDP">latest government projections</a> expect debt-to-GDP ratio to rise from last year's 97.3% to 122.4% by 2034. As this ratio rises, it is harder for the US to service its debt. Stretch this trend even further, and experts have warned that Washington <a target="_blank" href="https://markets.businessinsider.com/news/bonds/us-debt-crisis-gdp-ratio-unsustainable-default-treasury-bond-crash-2023-10">could face a default in as little as 20 years</a>.Former Treasury economist Mark Sobel — who participated in the webinar — has previously warned that the US must address its "mammoth deficits" to keep fiscal policy manageable. In previous commentary, he cited that this threat will <a target="_blank" href="https://markets.businessinsider.com/news/currencies/donald-trump-fiscal-policies-dedollarization-dollar-dominance-outlook-inflation-debt-2024-7">grow under a Trump administration</a>."While dollar dominance remains entrenched, both the platform and Trump policies would mean less confidence and trust in American leadership, weakened macroeconomic management and enormous burdens on markets to finance a large supply of Treasuries," Sobel, now the US Chair of Official Monetary and Financial Institutions Forum, said.In recent years, de-dollarization fears have stemmed from the actions of other countries. Although diversification into other currencies is ongoing, the webinar concluded that warnings of a dollar demise are exaggerated; instead, the greenback maintains its global role as both a reserve and international financing tool.For instance, many alarmists have focused on the dollar's share in foreign reserve holdings, often pointing out that the foreign central banks have <a target="_blank" href="https://www.businessinsider.com/dedollarization-china-allied-central-banks-hoard-gold-dollar-weaponization-record-2024-5">piled into gold as an alternative</a>. But this fixation omits the fact that bank deposits, sovereign wealth fund assets, and other dollar instruments have been on the rise among reserve holdings, JPMorgan said."In China's case, it has had an explicit target to bring down dollar holdings in FX reserve but has shifted USD holdings to state-owned entities. China could be under-reporting investment balances by as much as $100bn," the note said.Webinar experts also noted that the trade-weighted dollar is overvalued by virtually every long-term gauge. The US' robust economy, attractive yields, and large capital inflows have propped up a 30% dollar appreciation over the past decade in trade-weighted terms, JPMorgan said.

The biggest threat to the US dollar is America's exorbitant debt load, JPMorgan says

<ul class="summary-list"><li>Nassim Taleb warns against drawing wrong conclusions from noisy market headlines.</li><li>He criticizes the US for high debt and low growth, leading a fragile financial system.</li></ul>In life or markets, the first rule of thumb is <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/black-swan-author-nassim-taleb-warns-ai-bubble-stock-market-2023-6">avoiding ruin</a>. But that can be hard in a noisy world, according to Nassim Nicholas Taleb.If you read press headlines plagued with risk and uncertainty, and you're not paying close attention to the details, you can end up comparing dissimilar events and drawing the wrong conclusions, he told an audience at The Swedish Residence on Thursday.Taleb's career in trading led him to conclude that assuming today would be like yesterday is nothing more than betting on randomness and winning on luck. On more than one occasion, he witnessed <a target="_blank" class="" href="https://www.businessinsider.com/stock-market-crash-bubble-sp500-outlook-valuations-1929-2000-hussman-2024-9">market crashes</a> that followed strong bullish trends, in which many of his fellow traders lost it all, according to the book "Chaos Kings" by Scott Patterson.His trading style didn't follow the crowd. Taleb's early success came from buying cheap options that could have explosive upsides from rare events. His contrarian approach allowed him to rake in gains during the 1987 crash, when he had positions in cheap Eurodollar options that benefited from volatility. When the tides turned, he was flipping $2 to $3 contracts for $300 to $500, Patterson wrote. In 1998, it happened again after Russia defaulted on its debt, causing a stock market meltdown. Taleb made money on put options he bought on Russian banks, the book noted.By 2007, he had enough experience under his belt to publish the book, "The Black Swan," where he popularized the term as a representation of rare, unpredictable events that could have huge impacts, such as 9/11.From that, a way to measure unpredictability was born that included gray swan events: rare but predictable events like the 2008 financial crisis that showed signs of trouble through the housing bubble.Then there are fat-tailed events that, in most instances, have normal outcomes, and you don't expect to have huge impacts on markets. But, in one or a handful of data points, the outcome can be so extreme they skew the model. While Taleb didn't coin it, he helped further popularize it. Here, a pandemic is an example of both a gray and fat-tailed event because their outcomes can be tracked, while some can remain local, like ebola, or spread rapidly, like COVID.<h2 id="a4df31ed-faa5-4086-954f-d3a06f7787af">Betting on unpredictability</h2>We're familiar with the term "don't panic." It's probably advice you received at some point when things were going off the edge. For Taleb, if you're going to panic, do it early.When the coronavirus hit, that's what he did. According to Patterson's book, the alarming rate of contagion, coupled with an interconnected planet where global travel was constant, made him conclude that this could get very big, very fast.Taleb and a team of others published a<a target="_blank" href="https://necsi.edu/systemic-risk-of-pandemic-via-novel-pathogens-coronavirus-a-note"> note on January 26</a> categorizing the outbreak as an extreme fat-tailed event that could have the risk of ruin because of its non-linear spread. It was almost three months before the US declared a national emergency on March 13 and before the stock market crashed on March 20.Universa Investments, a hedge fund where Taleb is a distinguished scientific advisor, posted a<a target="_blank" href="https://markets.businessinsider.com/news/stocks/black-swan-fund-universa-investments-4000-percent-return-hedging-coronavirus-2020-4-1029076165"> 4,144% return</a> on the crash of 2020. A bystander could easily assume that the fund, which specializes in profiting from market shocks, turned certain positions on in response to the mounting fears. But that was far from the case. Instead, the firm's flagship tail-risk hedging strategy continually purchases daily put options that could rake in gains in the event of a crash.Brandon Yarckin, COO of Universa, told Business Insider that as Taleb drafts his academic work around events that don't directly apply to finance, such as Covid, there are corollaries to that thought process that help the investment firm build portfolios. Understanding the interconnectedness and how systems behave in relation to how markets behave is key to that process, he said. In the example of a pandemic, he noted that there are similarities between how diseases spread and how markets crash.<h2 id="99fc0009-0feb-4026-a474-a6f869703ff3">US deficit and the dollar</h2>During the Thursday evening talk, Taleb addressed the US deficit and mounting debt, both of which swelled after the pandemic.He highlighted the four categories of debt-based countries: those with low growth and high or low debt, and those with high growth and high or low debt. The US is in the category of low growth and high debt. The issue, he said, is that debt isn't made for large mature economies, which is where it's usually found most.This is because the growth trajectory tends to follow the S-curve pattern: slow, then rapid, then leveling off. You don't need to continue growing once you're on top of the curve. However, if a country accumulates high debt, then continued growth is required to absorb it, he noted. The outcome is a fragile leveraged financial system with increased interconnected risk, which is the US' current predicament, he added.Taleb emphasized that government expenditures aren't purely to blame. The US is stuck with accumulating debt-servicing costs, and it's now spending more on interest payments than military spending. This is creating a snowball effect, where it must keep borrowing the difference. At present, Taleb doesn't believe that the ballooning debt could be solved politically or by increased demand for US bonds.Mark Spitznagel, Universa's founder and CIO, <a target="_blank" href="https://www.businessinsider.com/biggest-stock-market-crash-since-1929-coming-mark-spitznagel-interview-2024-3">previously told Business Insider</a> that the mounting credit bubble could lead to a massive stock market crash that could be worse than 1929.As for the US dollar, for the most part, people like to transact with it because it's a stable currency, Taleb said. The real question is whether they use it as a store of value. Here, Taleb believes, is where the problem lies. The big question he asked the audience is, "How safe do you feel putting your money in Western banks?"From his perspective, not very safe. Since 2022, the financial and monetary systems have been used as a foreign policy tool, he said. Bank accounts and assets of Russian subjects have been frozen based on their political ties. Taleb believes that this type of behavior harms the US dollar long-term.

The godfather of black-swan hedging explains why mounting US debt and the weaponization of the dollar are leading risks today  

<ul class="summary-list"><li>America is facing a labor shortage problem as the population declines and more boomers retire.</li><li>Research Affiliates CIO Chris Brightman believes immigration reform is needed to boost the economy.</li></ul>Immigration is a hot political topic right now. But to one chief investment officer, immigration policy isn't a matter of political debate — it's an economic nonnegotiable.Chris Brightman, CEO and chief investment officer of the $147 billion investment manager Research Affiliates, believes immigration reform is long overdue — and billions of dollars are at stake if no action is taken.With an aging population and declining birthrate posing a significant economic risk in coming years, the US must take the necessary steps to boost immigration and economic productivity, Brightman wrote in a research note.<h2 id="d07da37b-d90a-4ec0-8bc0-42e235085dac">The depopulation issue</h2>Declining birth rates are causing a drag on many of the world's biggest economies, and the US is no exception.Fertility rates in the US are hovering around 1.6 children per woman, well below the replacement rate of 2.1, which means that natural US population growth is stagnating.According to Brightman, this is a big threat to US economic health. A declining population brings with it a declining labor force. With few workers and an increasingly aging population, programs like Social Security and Medicare become strained.Government initiatives to boost declining fertility rates aren't the answer, Brightman argues. Financial incentives in Japan, Korea, and Taiwan haven't raised fertility rates. Benefits offered by European countries such as paid parental leave and subsidized childcare have also failed to raise fertility rates.As seen in the graph below, US population growth is projected to trend negative in the coming years without additional inflows from immigration.<div type="image" title="Immigration rejuvenates population growth." height="691" width="942" msid="113937812" hostid="261" sizebytes="26162"></div><h2 id="cd3554fc-a73c-4f34-879d-067f5184864e">More immigration is the answer</h2>Brightman points out that immigrants have a long track record of driving productivity and innovation in the US economy. Immigrants have won 40% of all Nobel Prizes awarded to Americans since 2000 and originated a disproportionate number of US patents. Over half of US unicorns, or startups valued at over $1 billion, are founded by immigrants.Beyond these accomplishments, immigrants are necessary to bolster the <a target="_blank" class="" href="https://www.businessinsider.com/labor-market-indicators-jobs-pre-pandemic-levels-healthy-goldman-sachs-2024-10">US labor market</a>. As <a target="_blank" class="" href="https://www.businessinsider.com/best-retirement-cities-buy-home-baby-boomers-florida-north-carolina-2024-10">baby boomers enter retirement</a>, they're leaving behind unfilled job openings — a trend that began in 2010 and has only continued to worsen. There are currently more job openings than unemployed workers.<div type="image" title="More unfilled jobs than employed workers" height="631" width="942" msid="113937813" hostid="261" sizebytes="22280"></div>With a declining population growth rate and an increase of workers aging out of the workforce, increased skilled immigration is the ideal solution to prevent economic decline, in Brightman's view.<h2 id="24a88d05-7dcb-4bb3-b7a2-af31cfd4efd1">Immigration policy solutions</h2>Brightman sees the need for more friendly immigration policies such as providing permanent residency to immigrants who graduate from US universities.Admitting more computer scientists, engineers, doctors, accountants, educators, and other skilled professionals would greatly help the US labor shortage. Brightman highlights that the economy especially needs more healthcare workers and skilled tradespeople.Countries like Canada, New Zealand, and Australia use a point system with selection criteria such as education, professional skills, and language. Brightman believes the US can emulate this immigration model.One popular reform proposed by policymakers is to exempt immigrants with advanced STEM degrees from statutory limits on the number of green cards granted per year. According to an analysis by the Penn Wharton Budget Model (PWBM), such a proposal would boost the US population by 825,000 in the next 10 years and by over 2.5 million in the next 20 years.This proposal will not only fill gaps in the labor market but also significantly reduce the federal deficit in the next two decades, according to PWBM.An increased number of immigrants leads to increased tax revenues. PWBM estimates that if green card limits were lifted for immigrants with STEM degrees, the US government would see an extra $133 billion in revenues with only a $4 billion increase in outlays for a net deficit reduction of $129 billion.The effect would be even more dramatic by 2044, with $708 billion in tax revenue and $74 billion in outlays for a $634 billion reduction in the deficit.Immigration has a reputation for being a polarizing topic, but Brightman sees such a proposal as a necessary policy that'll tackle one of the biggest challenges facing the US economy.

How immigration reform will supercharge the labor market, reduce national debt by over $600 billion in the next 2 decades: Research Affiliates CIO

<ul class="summary-list"><li>PIMCO economist Peder Beck-Friis says that high US debt levels do not pose an immediate threat.</li><li>History shows that policymakers will eventually tackle the issue, he wrote in The Financial Times.</li></ul>Investors shouldn't fear US debt crisis just yet, as the situation is more benign than it appears, PIMCO econmist Peder Beck-Friis wrote on Thursday.In <a target="_blank" class="" href="https://www.ft.com/content/3f40c12f-b0d9-43c8-af02-851914ce3ea2">an op-ed in The Financial Times</a>, Beck-Friis wrote that investors will need to prepare for higher instability before policymakers treat the debt seriously."Financial markets are likely to become more sensitive to fiscal and political shocks. Limited fiscal space will probably constrain fiscal policies in future downturns," the economist wrote for the <a target="_blank" href="https://www.ft.com/content/3f40c12f-b0d9-43c8-af02-851914ce3ea2">Financial Times</a>. "Coupled with fatigue over quantitative easing programs, this will also add to a more volatile macro outlook."However, ss of right now, the situation does not pose any immediate threat, he noted.In the past year, Washington's widening budget deficit has set off alarms among market commentators, including <a target="_blank" href="https://markets.businessinsider.com/news/bonds/bill-gross-us-debt-crisis-deficit-inflation-federal-reserve-default-2024-2#:~:text=The%20US'%20%2434%20trillion%20debt,Bond%20King%20Bill%20Gross%20says">PIMCO's own co-founder Bill Gross</a>. Like many other <a target="_blank" href="https://markets.businessinsider.com/news/bonds/us-debt-ray-dalio-bill-gross-jeffrey-gundlach-bond-market-2023-9?_gl=1*1jncrfs*_ga*MTMxNDIwNDI1Ni4xNjc1Njg3OTU4*_ga_E21CV80ZCZ*MTcyMTMyMzA3MC40NDUuMS4xNzIxMzI0MDk4LjMxLjAuMA..">big-name market observers</a>, he argued that the aggressive rise in the US debt will eventually hit unsustainable levels.That's the case when interest rates are high, as they boost the borrowing costs the US must pay on its debt. This pushes the government to borrow even more, inducing a debt spiral.The repercussions of a <a target="_blank" href="https://markets.businessinsider.com/news/bonds/us-debt-crisis-gdp-ratio-unsustainable-default-treasury-bond-crash-2023-10">national default</a> are largely unknown, but some predict that fallout could include surging <a target="_blank" href="https://www.businessinsider.com/us-debt-problem-explained-deficit-gdp-inflation-economy-interest-rates-2024-4">inflation and an economic slump</a>.Although Beck-Friis acknowledged the worrying run-up in US debt, he also cited data that should brighten the outlook for the near term.Growth in the country's net national wealth has eclipsed public borrowing in the past decade, he said. The US also faces fewer fiscal constraints than its global peers and enjoys continued demand for its Treasury debt."What does that mean for US debt in coming years? The overall baseline outlook is probably one of status quo: The deficit remains high, debt continues to climb, and demand for US Treasuries stays robust, in part because of the dollar's status as a global reserve currency," Beck-Friis said.Eventually, the debt will need to be addressed.Analysts have reiterated that the most obvious response would be to lift taxes and slash spending. To their <a target="_blank" href="https://markets.businessinsider.com/news/bonds/us-debt-interest-payments-federal-budget-deficit-social-security-medicare-2023-9">disapproval</a>, political brinkmanship and large spending plans on both sides of the aisle have <a target="_blank" href="https://www.businessinsider.com/us-debt-crisis-deficits-spending-solutions-tax-consequences-inflation-interest-2024-1">dimmed chances</a> of this happening.Beck-Friis is less concerned about this. Pointing to history, he noted that Washington embraces reform eventually, especially when debt grows amid uncomfortably high inflation and interest rate levels."Previous episodes when federal interest payments (as a proportion of total outlays) reached similar levels as today were followed by fiscal consolidation — after the second world war, under Ronald Reagan in the late 1980s and under Bill Clinton in the 1990s," he said.What's more, the US has the means to respond.Compared to Europe, the country's tax burden is lower, meaning that Washington has more room to raise taxes. Not only would that provide more revenue, it would grant the US more fiscal credibility, Beck-Friis added.

PIMCO economist says fears of a US debt crisis are overblown - for now

<ul class="summary-list"><li>The market risks a harmful debt bubble, potentially spreading losses in the financial sector.</li><li>Economist Dambisa Moyo warns of overvalued stocks driven by enthusiasm for artificial intelligence.</li></ul>The stock market could be hosting one of the most harmful types of debt bubbles, with losses that risk spreading around the financial sector, according to one economist and investing veteran.In a recent op-ed for <a target="_blank" class="" href="https://www.project-syndicate.org/commentary/2024-stock-market-bubble-risks-factors-to-consider-by-dambisa-moyo-2024-07">Project Syndicate</a>, Dambisa Moyo — an economist, Goldman Sachs alum, and current principal of Versaca Investments — pointed to growing fears that the stock market is becoming overvalued. <a target="_blank" class="" href="https://www.businessinsider.com/ai-hype-train-profits-valuations-startups-google-openai-2024-7">Wall Street's enthusiasm for artificial intelligence</a> has reaped enormous gains for <a target="_blank" class="" href="https://www.businessinsider.com/big-tech-meta-microsoft-google-ai-earnings-investor-2024-7">mega-cap tech stocks this year</a>, pushing all three benchmark stock indexes to fresh records."The signs of bubbles emerging in financial markets are clear to see," Moyo wrote. "Such trends certainly justify worries about new stock-market bubbles."But even more concerning is that the US could be seeing one of the most problematic types of bubbles, fueled by highly borrowed and "unproductive" assets, Moyo said. Those assets pose more harm to the economy than productive assets, or assets financed with cash or equity, where losses are more contained to direct investors.The "best" example of that type of bubble is the <a target="_blank" class="" href="https://www.businessinsider.com/how-the-government-caused-the-mortgage-crisis-2009-10">subprime mortgage crisis</a>, she added, when excess housing supply and risky lending practices collided and caused home prices to plunge by a third.Most economists don't see a scenario like that happening today, thanks to stricter lending standards in the banking sector. But many companies that appear to be highly borrowed and unproductive appear to be financed in the shadow banking sector, Moyo said, where there's little regulatory oversight on debt-taking.Distress is already mounting among some of the most indebted and unprofitable companies. <a target="_blank" class="" href="https://www.businessinsider.com/us-corporate-bankruptcies-fed-rate-cuts-consumer-retail-spending-fisker-2024-7">Corporate bankruptcies are now scaling at the fastest pace since the pandemic</a>, according to S&amp;P Global data, with bankruptcy filings rising to 346 in June.Losses from troubled companies also risk contaminating other areas of the market, Moyo added."While a loss taken by someone who used accumulated savings will have only a limited effect on the wider economy, losses taken on 'borrowed' money, especially with high leverage, could prove contagious. A system with low visibility regarding the sources and forms of capital underlying many investments is a risky one. Greater scrutiny of unproductive, leveraged assets is crucial to avoiding a financial crisis," she said.Other Wall Street experts have voiced <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/stock-market-crash-outlook-smart-money-sp500-bubble-correction-recession-2024-3">concerns</a> about <a target="_blank" class="" href="https://www.businessinsider.com/stock-market-crash-dot-com-bubble-sp500-tech-overvalued-socgen-2024-7">stocks</a> and mounting <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/stock-market-crash-economy-debt-credit-bubble-interest-rates-2023-11">corporate</a> <a target="_blank" class="" href="https://markets.businessinsider.com/news/bonds/corporate-debt-binge-fed-rate-cuts-outlook-bonds-inflation-economy-2024-1">debt</a>, especially given how lofty valuations are in the market. According to one valuation metric, <a target="_blank" class="" href="https://www.businessinsider.com/stock-market-crash-sp500-valuation-all-time-high-bubble-hussman-2024-7">stocks look to be their most overvalued</a> ever, even surpassing levels seen in 1929.

The market is flashing signs of a dangerous debt bubble with losses that could be 'contagious,' economist says

<ul class="summary-list"><li>Commercial real estate pain is sparking defaults in bonds backed by loans on high-quality properties.</li><li>Single-asset, single-borrower CMBS are typically seen as safe havens by bond investors. </li></ul>Pain in commercial real estate has spread to an even ultra-safe corner of the commercial mortgage market, with losses being seen for bonds backed by debt on the highest quality properties. Defaults on single-asset, single-borrower bonds — which are commercial mortgage-backed securities tied to a single, high-quality property —have skyrocketed over the past few years, according to Commercial Real Estate Finance Council data cited by the <a target="_blank" href="https://www.wsj.com/finance/investing/commercial-real-estate-mortgage-bond-defaults-eaa258bc?mod=finance_lead_story">Wall Street Journal</a>. The percentage of these bonds that were in or approaching default has climbed to 8.7% so far in 2024 — about three times the default rate recorded two years ago, the trade group said.That may come as a surprise to some investors, as single asset CMBS bonds are typically regarded as super-safe in the real estate world. Many are rated triple-A by the top rating agencies, with safety often seen on par with US Treasury bonds. The debt defaults have already sparked losses for some investors. Debt holders of a high-profile AAA-rated building in midtown Manhattan lost more than 25% of their original investment after selling the bonds at a hefty discount — the <a target="_blank" class="" href="https://www.bloomberg.com/news/articles/2024-05-23/cmbs-buyers-suffer-first-loss-on-aaa-debt-since-financial-crisis">first loss of its kind recorded</a> since the Great Financial Crisis, Bloomberg reported.Defaults could also continue to rise as a wave of debt comes due in the commercial real estate sector. Of the $260 billion of single-asset, single-borrower debt outstanding, $35 billion is approaching maturity this year, followed by $154 billion of maturing debt over the next three years, per <a target="_blank" class="" href="https://www.philadelphiafed.org/-/media/frbp/assets/working-papers/2023/wp23-27.pdf#:~:text=Philadelphia%20Fed%20working%20papers%20are%20free%20to%20download%20at&amp;text=Floating%2Drate%20SASB%20bonds%20have%20an%20effective%20maturity%20of%20less%20than%20one%20year.">Philadelphia Fed</a> data.The wall of maturing debt hints at a murky future for commercial real estate, where investors have been watching for signs of trouble since the pandemic. Work-from-home trends have pushed office vacancy rates to the highest level recorded, <a target="_blank" class="" href="https://www.businessinsider.com/real-estate-outlook-office-buildings-vacancies-commerical-markets-investors-remote-2024-1#:~:text=The%20national%20office%20vacancy%20rate,points%20higher%20than%20pre%2Dpandemic.">Moody's data</a> shows. Interest rates, meanwhile, look poised to stay <a target="_blank" class="" href="https://www.businessinsider.com/when-will-fed-cut-interest-rates-powell-fomc-inflation-relief-2024-4">higher for longer</a>, potentially sparking more distress as <a target="_blank" class="" href="https://www.businessinsider.com/commercial-real-estate-big-trouble-crash-bank-crisis-2024-2">$1 trillion of debt</a> in the overall commercial real estate sector approaches maturity by the end of this year.The cocktail of high rates and anemic demand could result in <a target="_blank" class="" href="https://www.businessinsider.com/commercial-real-estate-big-trouble-crash-bank-crisis-2024-2">more defaults</a> and forced selling by property owners at heavy discounts, some real estate experts say, with office buildings being a particular sore spot. About $52 billion, or third of all office loans packaged into bonds, was in or approaching default in March, according to Kroll Bond Rating Agency data cited by <a target="_blank" class="" href="https://www.bloomberg.com/news/articles/2024-05-03/a-third-of-office-mortgages-packed-into-bonds-are-at-risk-of-default">Bloomberg</a>.<a target="_blank" href="https://www.businessinsider.com/office-market-collapse-outlook-commercial-real-estate-foreclosures-default-debt-2024-4">Commercial real estate foreclosures</a> broadly spiked 117% year-over-year in the first quarter, according to data from property analytics firm ATTOM.

An ultra-safe corner of the commercial real estate debt market is seeing losses as the sector struggles

The ultimate guide to using your credit card wisely

New Delhi: Markets regulator <keyword id="19901201" type="General" weightage="100" keywordseo="Sebi" source="keywords">Sebi</keyword> has proposed a minimum ticket size or <keyword id="21732014" type="General" weightage="20" keywordseo="investment-threshold" source="keywords">investment threshold</keyword> of Rs 1 crore for the RBI-regulated originators and unregulated entities engaged in securitisation activities. The proposal also introduced limitations on the number of investors in <keyword id="22496291" type="General" weightage="20" keywordseo="private-placements" source="keywords">private placements</keyword>, allowing <keyword id="23778966" type="General" weightage="20" keywordseo="securitized-debt-instruments" source="keywords">securitized debt instruments</keyword> (SDIs) issued privately to be offered to a maximum of 200 investors. If this limit is exceeded, the issuance must be classified as a public issue. Public offers should remain open for a minimum of three days and a maximum of 10 days, with advertisement requirements aligned with Sebi's regulations for non-convertible securities. Additionally, the regulator has suggested that all securitized debt instruments should be issued and transferred exclusively in demat form. SDIs are financial products created by pooling together various types of debt -- such as loans, mortgages, or receivables -- and then selling them as securities to investors. This process, known as securitisation, allows the originator (such as a bank) to convert illiquid assets into liquid ones, providing an alternative source of funding. Investors in these instruments receive returns based on the performance of the underlying debt pool, and the risk is spread across multiple assets, offering potentially attractive returns. The current framework is based on Sebi's 2008 regulations, with updates from the Reserve Bank of India's (<keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword>) 2021 directions on securitising standard assets. The Securities and Exchange Board of India (Sebi) is now considering updates to the regulatory framework for securitized debt instruments and sought public comments till November 16 on the proposals. Regarding risk management, Sebi has proposed that originators retain a minimum risk retention of 10 per cent of the securitised pool or 5 per cent for receivables with a maturity of up to 24 months. A minimum holding period requirement will also be specified by Sebi for underlying receivables to ensure that originators maintain an interest in the underlying assets, the regulator said in a consultation paper. The regulator further suggested including an optional clean-up call for originators, allowing them to repurchase up to 10 per cent of the original value of the assets. This call is optional and intended to help manage the pool's longevity without mandating additional commitments from the originator. Liquidity facilities, essential to handle timing mismatches in cash flows, should either be provided directly by the originator or through an appointed third party. The updated definition of "debt/receivables" limits permissible underlying assets to listed debt securities, accepted trade receivables, rental incomes, and equipment leases while disallowing single-asset securitisation. The proposal establishes minimum track record requirements for both originators and obligors. Originators should have a minimum of three years of operating experience, while trade receivables specifically require at least two cycles of successful, default-free payments.

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