The United States needs entities to purchase debt because it funds various projects and tasks. In an environment of rising interest rates and slower band purchasing, this could bring the yield of bonds higher, making it a more attractive investment for individuals. Bonds have maintained lower yield but as interest rates increase, they may see an influx of money.
Another topic that was brought up by China is the idea of there being a trade war with the United States. Certainly there would be mixed feelings about being in that situation and investing with the same county. The current administration continues to put pressure on outside countries, which will only destabilize the current markets.
If these talks should turn into reality, look at the U.S. Dollar to fall against other currencies. What this means is vacations to foreign countries could cost more as it would take more dollars to purchase other currencies. For exports, it may make them more competitive.
Keeping an eye on what China does is critical because our economies are so intertwined that one missed step could take down not only our economy, but also the world with it. Given 2007 showed proof of that, it could very much happen again.
Going forward, bond positions should be monitored because this would mean prices increase. Combined with a rising interest rate environment, this should be good for investors where interest rates dictate returns. Currency traders may note a falling dollar, bringing with it both good and bad. China continues to be a key partner in the global economy and if they slow their purchasing of U.S. debt, the question will become who is going to step in and pick up the slack.
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Try AI Portfolio ArchitectNathan Young is a Senior Member of Macroaxis Editorial Board - US Equity Analysis. With years of experience in the financial sector, Nathan brings a diverse base of knowledge. Specifically, he has in-depth understanding of application of technical and fundamental analysis across different equity instruments. Utilizing SEC filings and technical indicators, Nathan provides a reputable analysis of companies trading in the United States.
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