Please ensure Javascript is enabled for purposes of website accessibility

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

By Matt Koppenheffer and David Hanson – Feb 2, 2014 at 11:36AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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

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.

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. 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.

Invest Smarter with The Motley Fool

Join Nearly 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Citigroup Stock Quote
Citigroup
C
$48.41 (1.77%) $0.84
Aflac Stock Quote
Aflac
AFL
$71.93 (1.48%) $1.05
American International Group Stock Quote
American International Group
AIG
$63.11 (2.72%) $1.67

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
349%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.