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The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to revision over time.
The national debt has reemerged as a major market concern. While the trajectory has appeared unsustainable for quite some time, higher interest rates and a rising interest burden have brought it to the fore, prompting questions of whether it will precipitate a crisis in the medium term.
We recognize the risks to the economy and the market but are not alarmists. We believe there are still solutions and time to address the underlying issues surrounding the national debt.
We foresee a combination of factors putting the debt on a sustainable path—a mix of productivity growth, moderate inflation, spending cuts, and tax hikes should be enough to avoid a major crisis.
Yet it may still require a mini-crisis in the bond markets—similar to the early 1990s in the US or 2022 in the UK—to spur Congress into action.
Because the US issues its own currency, it does not face the same budgetary constraints as a household or firm would. However, it is still hemmed in by inflation and potential political repercussions.
The US enjoys an “exorbitant privilege” as the global reserve currency and preferred destination for international savings. This gives its policymakers more flexibility than other countries would have when it comes to managing debt.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to revision over time.
MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein.
The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
Eric Winograd is a Senior Vice President and Director of Developed Market Economic Research. He joined the firm in 2017. From 2010 to 2016, Winograd was the senior economist at MKP Capital Management, a US-based diversified alternatives manager. From 2008 to 2010, he was the senior macro strategist at HSBC North America. Earlier in his career, Winograd worked at the Federal Reserve Bank of New York and the World Bank. He holds a BA (cum laude) in Asian studies from Dartmouth College and an MA in international studies from the Paul H. Nitze School of Advanced International Studies. Location: New York
Chris Brigham is a Private Client Senior Research Associate at Bernstein. He joined Bernstein in 2018 as a member of the US Portfolio Strategy team. Prior to Bernstein, he worked in finance and strategy for EpiBone, a biotechnology startup. He has previously worked as a research analyst at Longview Asset Management and Tiresias Capital (Omni Partners) and as an event-driven analyst and trader at Bank of America Merrill Lynch. Chris earned his MBA from Columbia Business School, where he completed the Value Investing Program, and graduated Phi Beta Kappa with a BA in Economics from Claremont McKenna College. He completed the General Course at the London School of Economics and is a CFA charterholder. Location: New York