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Global Macro—In Depth

A deeper analysis of investment trends and topics across asset classes and global markets.

April 1, 2021

Paul Christopher, CFA, Head of Global Market Strategy

Gary Schlossberg, Global Strategist

The long-term consequences of U.S. deficit spending

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Key takeaways

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  • Currently at $26 trillion, the federal debt load is staggering, and its long-term prospects are troubling.
  • We believe it unlikely that investors will face the most damaging effects of the U.S. fiscal threats anytime soon. Moreover, extrapolating current trends ignores other factors that should blunt the worst outcomes over the next 10 to 15 years.
  • More likely, in our view, is that federal debt levels remain high but moderate their growth rate. Our long-term expected returns for fixed income and equities account for a scenario of somewhat lower investment returns and greater market volatility than long term historical averages. In turn, these assumptions influence the strategic allocations in our long-term portfolio models.
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