Citi outlines the risks:
- going to have roughly a $2T deficit this year
- the proposals could add approximately $600B to next year’s deficit, though tariff income might offset about $200B of that
- “Financing this deficit is going to require ongoing higher treasury issuance, which means high interest rates potentially valuation overhang” ... rising yields create competition for investment dollars as risk-free returns become increasingly attractive compared to stocks
And also opportunity:
- continued fiscal stimulus budget measures represent “a positive fiscal impulse, which net-net is good for the economy economic conditions and, most importantly, S&P 500 (SP500) earnings”
Concludes:
- S&P 500 is currently trading around “a fair value range, about 23x trailing earnings” likely volatility ahead as new economic information throughout the summer months I processed
Info via CNBC interview
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S&P 500 update:
