⏳ Reading Time: 3 minutesA few different things have caught our attention this week. First, there’s the ongoing debate around the decision of the US Treasury to increase its purchases of long-dated government bonds. Second, there’s the announcement of a US$16.7 billion settlement between Meta and various US states on the question of social media harm. Finally, Bill Gates has released an essay highlighting the significant potential risks and opportunities from Artificial Intelligence – highlighting the need, in his view, for significant adjustments to tax regimes around the world. We wanted to explore how these various points might be related and what they could mean for portfolios.
We think there are a few points worth highlighting. First, the fiscal picture in Europe and the US is generally quite challenging. Debt to GDP is generally rising, notably in the US, and societies are ageing. As we discussed last week, that might be part of the reason why long-dated yields in the US have been drifting higher – prompting some intervention from the Treasury. The current consensus view is that intervening in the Treasury market isn’t a long-term solution for rising rates. Most investors would argue that having a lower fiscal deficit is the correct answer. But there’s currently little political will to achieve that, in the US and elsewhere.
