Stay Calm: This is not a forecast, prediction, or projection.
It’s just a question that needs to be asked:
Are you prepared for the scenario where a constitutional crisis becomes a financial crisis?
On Tuesday, February 18, 2025, the New York Times published a guest essay suggesting that we may be blundering our way into a financial crisis. The authors, Wendy Edelberg and Ben Harris of the Brookings Institute, highlighted that the real risk comes from political leaders’ irresponsible actions rather than federal borrowing.
The Trump administration’s chaotic budgetary decisions, such as threatening to withhold congressionally enacted spending and allowing unauthorized access to Treasury payment systems, have increased the risk of a fiscal crisis.
The $28 trillion Treasury market relies on trust, and any threat to withhold debt payments could destabilize financial markets. Political blunders, rather than economic factors, are seen as the primary trigger for a fiscal crisis, with potential consequences including rising interest rates, reduced private investment, and widespread financial institution failures.
Yesterday, the Stipelis Research team asked: Is Washington spooking the stock market?
Today, investors are shifting their focus to bonds, indicating a flight to safety. The index representing small stocks has fallen below both its 50-day and 200-day moving averages, signaling potential bearish trends. Gold prices have soared to unprecedented levels, reflecting heightened uncertainty and a search for stable assets. The dollar is showing signs of weakness, which could be attributed to various economic and political factors. Meanwhile, crude oil prices are declining, possibly due to reduced demand expectations or geopolitical tensions.
These market movements suggest growing anxiety among investors about the stability of the financial system.
While we are not ringing the alarm bell, it is prudent to consider how to be financially prepared for potential crises. Here are some immediate steps you can take:
- Review Financial Statements: Understand your current financial position.
- Consult Financial Advisors: Discuss your investment strategy and any adjustments needed.
- Talk to Your HR Department: Review your retirement plan and ensure your portfolio is diversified.
- Update Your Budget: Identify areas to cut back and increase your savings.
- Check Your Emergency Fund: Ensure you have an adequate emergency fund.
- Stay Informed: Keep up with financial news and market trends.
Again, Stipelis is not calling for a bear market. We are not making a prediction on the future.
But you must know that this administration has the potential to create a fiscal or financial crisis.
We hope to avoid such a disruption!
But our question remains: Are you prepared?
Stephen coleman 2-25-2025