The good news? We’re all in this together. The bad news? I’m talking about the government DEBT boat!
Take a look at the MoneyShow Chart of the Day, which shows net debt in relation to advanced economy GDP (courtesy of the Wall Street Journal). You can see that government debt in the US, Japan, the eurozone, and other major countries and economic regions continues to spiral higher relative to economic output.
Source: Wall Street Journal
For a long time, pundits talked about the rising debt threat…but markets didn’t much care. More recently, we’ve seen evidence that investors are getting nervous. Long-term bond prices have been falling at home and abroad, sending yields to multi-year (and multi-decade!) highs.
What’s the impact on YOU? You’ll lose money if debt fears rise and you own long-term bonds or ETFs that invest in them. The iShares 20+ Year Treasury Bond ETF (TLT) is down 3.6% in the past month.
If you own rate-sensitive stocks, you’ll take some hits, too. The REIT-loaded State Street Real Estate Select Sector SPDR ETF (XLRE) shed 1.6% in the past month, while the State Street SPDR S&P Homebuilders ETF (XHB) tanked 10.1%.
But it’s tech I’d keep a very close eye on. Growth stocks are sensitive to the level of rates, too – even as some investors think it’s all about AI hype and headlines.
We STARTED to see tech names take on water at the end of last week. If yields keep rising, that trickle of selling could turn into a short-term flood.
