I recently attended an outdoor wedding where I reunited with many people I hadn’t seen since the onset of the pandemic. In the days prior to the wedding, we were all keeping an eye on the weather forecast and it didn’t look promising. As it turned out, it wasn’t.
When the day finally arrived, the weatherman sent us a deluge of rain. Fortunately, a large tent provided shelter, but the grounds became soaked and the wooden dance floor was as slippery as a skating rink.
Nonetheless, everyone made the best of it. The celebration went on with many attendees rolling up their pant legs and going barefoot. The storm was forecast and the weatherman was spot on, but the storm didn’t deter the celebration. In fact, it will be a fond memory for all in attendance.
There’s a potential storm brewing in the financial world that could arrive this coming fall. It may not happen that soon, but it will come eventually. And it’s a financial storm that can’t be kicked down the road forever.
Someday the elected officials that are stewards of our financial wellbeing will need to make difficult decisions. The storm that’s in the autumn forecast pertains to our nation’s debt ceiling. With the path we’re on, the government will not have enough money to pay our nation’s bills, likely in September or October.
One approach to the situation will simply be to raise the debt ceiling.That will allow Uncle Sam to issue more Treasuries and borrow more money to pay our bills and meet our debt obligations.
We’ve done this before over the years. Many times. If we don’t raise the debt ceiling, people who are employed by Uncle Sam might not get paid. Or we might default on the debt and have our nation’s credit rating downgraded once again.
The situation could definitely get ugly and nobody is certain how the economy and financial markets would be impacted. Without being political, I don’t think we should have ever put ourselves into this position. If we raise the debt ceiling and pretend there’s no issue, we’re doing nothing more than just kicking the can down the road again. If we default, a lot of financial pain will certainly ensue, and Uncle Sam’s financial reputation, such as it is, will be tarnished even more. A potential political showdown is the financial storm that concerns me.
Inflation is a topic that is frequently talked about, in the news and in everyday conversations. Cars, trucks, building supplies, groceries; prices seem to be rising everywhere, even at fast food restaurants.
Many economists say the situation is temporary, but I think it’s prudent to anticipate that prices will continue to rise across the board. And as the debt ceiling crisis gets closer, there could be pressure to push them even higher.
As a financial advisor, when helping households plan and prepare for their financial future, I always suggest they anticipate the unexpected.
Financial storms can appear anywhere, at any time. We’re facing one that’s already on the radar. Nobody can say with certainty how it will play out, but I am concerned about the potential for bad news. It’s naïve not to anticipate or prepare for future financial turbulence that we know is coming.
Do you know someone who would like to meet with a financial advisor?
Ken Morris 248.952.1744
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Ken is a registered representative of LPL Financial. Securities and financial planning offered through LPL, a Registered Investment Advisor, member FINRA/SIPC. Ken is Vice-President of the Society for Lifetime Planning in Troy. All opinions expressed are those of Ken Morris. LPL and Society for Lifetime Planning are independent companies. Investing involves risk including loss of principal. No strategy assures success or protects against loss.