What Will Raising the Debt Ceiling Do to My Investments?

by Peter Rizzo

Life Settlements in a Retirement Account? Think Again.

Lately, we are often asked two questions. What will raising the debt ceiling do to my investments? And, how can I keep my cash safe?

Raising the debt ceiling can have various effects on investments, depending on the specific circumstances and market conditions. In general, raising the debt ceiling allows the government to borrow more money to finance its spending obligations, which can lead to increased government spending and investment in certain sectors.

Here are some potential effects of raising the debt ceiling on investments:

Interest rates: If the debt ceiling is raised and the government borrows more money, this can increase the supply of bonds on the market, which could put downward pressure on bond prices and upward pressure on interest rates. This could lead to higher borrowing costs for businesses and individuals, which could potentially reduce investment and economic growth.

Stock market: Raising the debt ceiling can also have an impact on the stock market. If investors are worried about the government’s ability to manage its finances, this could lead to increased volatility and a potential sell-off of stocks. However, if the government is able to address concerns about its finances and restore confidence, this could lead to increased investment in stocks.

Infrastructure spending: Raising the debt ceiling could potentially lead to increased government spending on infrastructure projects, such as roads, bridges, and public transportation. This could benefit companies in the construction and engineering sectors, as well as companies that provide materials and equipment for infrastructure projects.

Overall, the effects of raising the debt ceiling on investments can be complex and depend on a variety of factors. It is important for investors to stay informed about developments in government policy and market conditions in order to make informed investment decisions.

When it comes to holding cash, the safest way is to keep it in a federally insured bank account. This ensures that your money is protected by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor per insured bank.

Here are some types of bank accounts that offer FDIC insurance and can be a safe option for holding cash:

Checking accounts: Checking accounts are designed for frequent transactions and offer easy access to your cash. Most checking accounts are FDIC-insured, but be sure to check with your bank to make sure.

Savings accounts: Savings accounts typically offer higher interest rates than checking accounts, but may have more restrictions on withdrawals. Like checking accounts, most savings accounts are FDIC-insured.

Money market accounts: Money market accounts are a type of savings account that typically offer higher interest rates than traditional savings accounts. They may also have higher minimum balance requirements and withdrawal restrictions. Money market accounts are also FDIC-insured.

Certificates of deposit (CDs): CDs are a type of time deposit that require you to lock your money up for a specified period of time, typically ranging from a few months to several years. CDs generally offer higher interest rates than savings accounts, but you may be charged a penalty if you withdraw your money before the CD term is up. CDs are also FDIC-insured.

It’s important to note that while holding cash in a bank account is generally considered safe, it may not be the most effective way to grow your wealth over the long term. If you’re looking to invest your money for the future, you may want to consider other options such as stocks, bonds, real estate, and many of the alternative investments available with Self-Managed plans. However, these options come with greater risks and may not be suitable for everyone. It’s always a good idea to speak with a financial advisor before making any investment decisions.

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