Oliver's Insights: The risk of a US public debt crisis – and implications for shares

The key points are:

  • US tax cuts point to ongoing budget deficits around 7% of GDP, a rising trend in already very high public debt and a further rise in already record debt interest payments.

  • While a full-blown US public debt crisis is unlikely, this along with declining foreign investor confidence in US policy making could mean upwards pressure on US bond yields.

  • In the near-term shares look like they will break to new highs. But the risk of further tariff and US public debt worries driving another bout of weakness is high

  • It’s possible the $US is losing its ‘safe haven’ status. This means the $A may behave a bit less as a shock absorber in a crisis, meaning more pressure on the RBA to cut rates than might normally be the case.

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