With the hard deadline to raise the US debt ceiling approaching, Treasury Secretary Janet Yellen warns that the country may be unable to pay its bills in just over a week.
This potential default could lead to economic turmoil affecting various sectors.
To mitigate the impact, consumers can take certain steps.
Military families should ensure they have extra cash and topped-off emergency funds to handle delayed paychecks.
Temporary loans and assistance from military-facing banks can also be considered.
Bond investors should expect volatility and pay attention to the maturity dates of Treasury bills, considering selling bills that mature around June 1 and reinvesting in bills that mature sooner.
Maintaining a balanced portfolio and focusing on high-quality investments is advisable, avoiding high-risk debt instruments.
Adjustments to 401(k) allocations, particularly the equity-to-bond ratio, are recommended. Even if an agreement is reached, stocks could lose value, erasing trillions of dollars in household savings.
Investors should exercise caution and not over-invest, as there are concerns of a looming recession.
Social Security payments could be delayed in the event of a debt default, but the Treasury might continue making on-time payments using the program’s trust fund.
Payments are typically dispersed four times a month. While there may be a “relief rally” in the market after a resolution, investors should consider other economic pressures and avoid becoming over-invested.
