Government Finances Are A Mess: Focus On Quality

Aug. 02, 2023 6:00 PM ET, , , , , , , , , , , , , , , , , , , 30 Comments

Summary

  • Fitch Ratings downgraded the US Federal Government from AAA to AA+, causing the stock market to roil.
  • Real estate investment trusts (REITs) have fared better than tech stocks in the day after the downgrade announcement, as REITs were already relatively cheap.
  • While the downgrade itself is virtually meaningless, it does spur us to look at the US Government's finances.
  • Uncle Sam's fiscal situation is not in great shape, with deficit spending and increasing debt, combined with falling population growth, leading to what I call a "Monetary Death Spiral."
  • Amid fiscal and macroeconomic uncertainty, I make the case that quality assets and quality companies will always be valuable, so investors should focus on those.
  • Looking for a helping hand in the market? Members of High Yield Landlord get exclusive ideas and guidance to navigate any climate. Learn More »
Government Debt

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On Tuesday, August 1, Fitch Ratings downgraded the US Federal Government from AAA to AA+. That has triggered a roiling in the markets, sending all the major indexes lower.

Interestingly, despite being generally more interest rate-sensitive than the average stock, real estate

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This article was written by

20.43K Followers

Austin Rogers is a REIT specialist with a professional background in commercial real estate. He writes about high-quality dividend growth stocks with the goal of generating the safest growing passive income stream possible. Since his ideal holding period is "lifelong," his focus is on portfolio income growth rather than total returns.

Austin is a contributing author for the investing group High Yield Landlord, one of the largest real estate investment communities on Seeking Alpha, with thousands of members. It offers exclusive research on the global REIT sector, multiple real money portfolios, an active chat room, and direct access to the analysts. Learn more.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of SCHD, ARE, ADC, BEP, ENB, REXR, VICI, WPC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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