Did you know that the U.S. has only balanced its federal budget four times in the last 50 years?

Fiscal management is one of the most critical aspects of a stable economy, and still it remains a challenge for many governments.

Here’s what you’ll find in this issue:

• Bonds Are A Good Hedge For Geopolitical Risk But Terrible For An Inflation Hedge: First, we’ll look at why bonds struggle as a hedge against inflation 📊

• Who Does The Stock Market Prefer In The US Election? Next, we’ll look at how the stock market views political leadership 🤔

• The Risks Of A Growing Fiscal Deficit: Finally, although a growing fiscal deficit could become a significant issue for markets by the 2030s 😬

Whether it’s long-term or short-term, our aim is to give you the insights you need to succeed in your investments. Let’s go!

Bonds Are A Good Hedge For Geopolitical Risk But Terrible For An Inflation Hedge 📊

Bonds do well in times of geopolitical risk, recession risk, and financial-crisis risk.

They also did well at a time of pandemic risk, if you want to add that.

However, there is one type of risk for which bonds are extraordinarily ill-suited, and that’s inflation.

Interestingly though, we are going through a period of what many believe is extreme geopolitical risk and the stock market is still outperforming bonds 📈

Who Does The Stock Market Prefer In The US Election? 🤔

The stock market has a preference for Donald Trump because of taxes and regulation.

Investors aren’t happy with tariffs or some of the unpredictability of Trump.

But they lived with him for four years.

They know him better than they did in 2016.

The bigger issue is what happens to Congress, because Congress will decide what happens to the Trump tax cuts 🏛️

Even if Trump becomes president, if the Democrats capture the House or keep the Senate, you could have a very different tax landscape in 2026 than you do today.

That is going to be important.

In the really long term, the market goes up under Democrats and Republicans, as long as the government isn’t socializing the economy 👍

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The Risks Of A Growing Fiscal Deficit 😬

Running up the deficit is a long-term problem, but it’s not a pressing issue in the near-term for financial markets.

There is not a potential crisis brewing for quite a long time, not until the mid-to-late 2030s.

If the bond market starts to push interest rates higher, it will signal that the country has too much debt and Washington has to do something about it, such as cutting expenditures and raising taxes 💰

The government will have to deal with it at some point in the future, but not in the near future.

Inner Circle Global Macro Update 🔍

If you wish to gain access to our Inner Circle Global Macro Update, packed with exclusive insights from award-winning portfolio manager and economist Seth Antiles, with secrets that’ll give you an edge in the stock market, be sure to upgrade by clicking the button below 👇️