Recent headlines have investors concerned about what may happen to their portfolios if the U.S. government cannot reach an agreement to increase the debt ceiling/limit, thereby risking default:
The reality is that headlines like these are nothing new. In the historic global market growth of wealth graphic below, we highlighted every major “impending disaster” as it relates to the debt ceiling/limit since 1975. We did however, skip adding in the wars, recessions and global pandemics because it just seemed like the chart was getting….kind of busy.
If you scroll through the narratives corresponding to the yellow and red indicators in the source link (here and below the graphic), you’ll find plenty of unprecedented situations and a curiously recurring use of “extraordinary measures.”
As the graphic indicates, markets have endured many debt ceiling/limit “political exercises” in the past and there should be no reason to believe that they would not going forward.
Other Fun Facts:
Depending on who is doing the research, it is said that the U.S. has raised its debt ceiling (in some form or other) at least 90 times in the 20th century.
In any event, the debt limit has NEVER been lowered…
History’s evidence reminds us that using today’s headlines to predict short-term market outcomes correctly is exceedingly difficult. The strategies we implement aren’t designed to anticipate the unknown future – they’re designed to endure it.
Invest with evidence.
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