David R. Kotok, October 30, 2024

(The following was first published on Cumberland Advisors’ and The Kotok Report websites, and via LISTSERV. For details, visit https://www.cumber.com/ or https://kotokreport.com/.)

There are many factors which impact interest rates, and the federal deficit and the total federal debt are only two of them.

That said: The political rhetoric and proposals have clearly had some impact on the increase in the yields of Treasury notes. The Committee for a Responsible Federal Budget is a nonpartisan Washington-based organization whose board has many established and skilled folks. They are of various political persuasions, Democrats, Independents and Republicans. Their common theme is about handling and restraining federal debt and deficits. Their full analysis is publicly available for anyone to see: 

“The Fiscal Impact of the Harris and Trump Campaign Plans,” https://www.crfb.org/papers/fiscal-impact-harris-and-trump-campaign-plans

 Here’s a summary paragraph:

In this update, we find Vice President Harris’s new proposals will increase her ten-year borrowing by $450 billion and President Trump’s new proposals will increase his borrowing by $250 billion, under our central estimate. As a result, Vice President Harris’s plans would add $3.95 trillion to the debt over a decade (with a range of $300 billion to $8.3 trillion), compared to $3.50 trillion in our initial analysis. President Trump’s plans would add $7.75 trillion to the debt (with a range of $1.65 to $15.55 trillion), up from $7.50 trillion in our initial analysis.  Is this current round of political rhetoric impacting markets? It seems the answer is yes. How much? There is no way to be sure.