Does the U.S. National Debt Make the Stock Market Uber-Risky?

What's a rising stock market good for in the face of a $17 trillion national debt?

Feb 2, 2014 at 11:36AM
Wtmi

In this video from Tuesday's Where the Money Is as part of the Motley Fool's "Ask a Fool" series, Fool banking analysts Matt Koppenheffer and David Hanson take a question from a Fool reader, who asks, "If the U.S. has a debt of $17 trillion how can a rising stock market ever be anything more than shuffling the deck chairs on the Titanic?"

Matt discusses that although the national debt number can seem frighteningly high, putting it in the perspective of historically low interest rates at the moment, combined with a growing economy, makes the U.S.'s ability to service that debt look much more optimistic. As well, from a historical perspective, the nation has faced debt-to-GDP ratios that were as high or even higher than current levels, and was able to pay down those debt levels while still growing the GDP year over year at a healthy rate.

Matt and David also look at the stock market, and note that investors shouldn't be making their investing decisions based on broader macroeconomic trends. Stock prices are based on the strength of the individual businesses on the market and analysts' expectations of those businesses, and examining the business should be the best place to turn to make informed stock investment decisions.

However, for those investors who are looking to diversify geographically away from the U.S., Matt gives three American companies that make a large percentage of their revenue internationally, whose stocks might be worth a look.

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David Hanson owns shares of American International Group. Matt Koppenheffer owns shares of Aflac, American International Group, and Citigroup. The Motley Fool recommends Aflac and American International Group. The Motley Fool owns shares of American International Group and Citigroup and has the following options: long January 2016 $30 calls on American International Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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