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Policy, Politics & Portfolios

Published March 28, 2023 | 10 min read time

Updates and analysis from Wells Fargo Investment Institute on what federal budget, regulatory, and trade decisions could mean for investors.

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Opportunities amid federal, state budget negotiations

Sizing up the other budget issue

  • Federal debt financing as a share of revenues is fast approaching a level typically associated with government austerity measures to contain the deficit.
  • For investors, budget austerity measures likely would tilt the deficit issue from a market-driven, risk-off event to more of a sector issue keyed to the pattern of future tax and spending reforms.

2023 farm bill primer

  • The Agriculture Improvement Act of 2018 (“farm bill”) is expiring this year. Congress has until September 30 to reauthorize it.
  • Cost concerns coupled with partisan provisions will likely spark more debate than usual this year.
  • Depending on the outcome, the bill could have near-term implications for the Consumer Staples and Consumer Discretionary equity sectors, but also longer-term benefits for sectors impacted by climate provisions.

The state of state and local finances

  • In our view, there is low default risk for states, though headline risk around the topic could increase volatility for some lower-quality issuers in the near term.
  • We reiterate our favorable rating on municipal bonds, which historically have been supported by perceived safe-haven demand during economic downturns.

Article written by:

Municipal Analyst
Municipal Analyst

Equity Sector Analyst, Industrials/Materials

Global Strategist
Municipal Analyst
Investment Strategy Analyst

Investment Strategy Analyst