As US election looms, investors fear for fiscal peace

The U.S. Presidential election in 2024 is causing concerns in financial markets. Right now, the U.S. Congress is arguing about government funding, and U.S. bond markets are experiencing high borrowing costs, rethinking interest rates, and how the government spends money.

Earlier this year, there was a near-crisis over the debt ceiling, which led to a loss of the U.S.'s top credit rating. Now, there's more arguing over next year's spending plans. It almost caused a government shutdown recently, and a temporary solution has been put in place until November 17.

Moody's, a credit rating agency, has warned that all this chaos in government finances could threaten the U.S.'s top credit rating.

Some people say this is just how things are in today's divided political world. However, what's making things even more uncertain is the possibility of a re-run of the 2020 election, with former President Donald Trump and current President Joe Biden both being likely candidates.

The economy has been doing well, with lots of people employed, but inflation (rising prices) and high interest rates are causing problems. Also, spending a lot of money to deal with the effects of the pandemic has made inflation worse.

But what really confuses people, especially outside the U.S., is the idea of Trump coming back. Trump's supporters in Congress have been causing problems by pushing for spending cuts and changes in international relationships, like cutting funding for Ukraine.

If Trump wins in 2024, it could have a big impact on the world, especially in areas like climate policies and how democracy works.

Some people like Unicredit's Chief Economic Advisor Erik Nielsen think a Trump win would be very bad for the U.S. and the world. But not everyone agrees.

What's clear is that there are many different ideas about what should happen in the U.S., and it's hard to predict what will actually happen in the future, especially in the next 13 months or five years.

Financial markets usually don't worry about things that might happen so far in the future. But the current uncertainty is making it hard for them to make decisions.

Hedge fund manager Stephen Jen thinks a lot of the disagreement in the U.S. is about issues like equality and the environment. Financial markets might react positively if Trump's economic agenda, which includes tax cuts, comes back.

However, even if taxes are cut, it might not solve the main problem right now, which is rising long-term borrowing costs. This is happening because many people think the U.S. will have a strong economy for a long time, but that also means big budget deficits and debt.

The makeup of Congress will also play a big role in shaping U.S. policy. If it stays divided, it will be hard for any president to get things done.

All of this arguing about government finances and debt is making bond markets nervous. Goldman Sachs, a big bank, says that interest costs on government debt could rise a lot by 2024, and it's not clear if the government can fix that problem.

So, in the world of finance, there's a lot of uncertainty and worry about what's going to happen in the U.S. in the coming years, especially with the 2024 election on the horizon. Please Share This News Thank You