The U.S. national debt has ballooned to a staggering $34.5 trillion, an increase of nearly 50% since the start of the decade. This historic high has been met with some trepidation by investors and economists alike. This is because it could have severe consequences in multiple ways, raising concerns about its potential impact on the stock market.
Rising Interest Rates Spell Double Trouble
One of the most immediate concerns surrounding the national debt is its effect on interest rates. In order to finance expanding debt, the U.S. government issues Treasury bonds. As the debt grows, the government needs to sell more bonds to raise money. This increased supply, according to basic economic principles, could push interest rates higher.
Additionally, when rates are higher, borrowing becomes more expensive for businesses and consumers. This can potentially dampen economic growth and corporate profits. Combining these factors…
