All articles tagged with #fiscal outlook
UK long-term bond yields reached their highest since 1998, driven by debt concerns and inflation fears, causing the pound to weaken and putting pressure on the government to address a significant budget deficit amid rising borrowing costs.
Federal projections indicate that Social Security will run out of funds by 2034 and Medicare by 2033, a year earlier than previously estimated, due to increased benefits, lower fertility, and rising healthcare costs, prompting urgent calls for legislative action.
California's 2025-26 budget is projected to be roughly balanced, thanks to proactive legislative measures addressing anticipated fiscal challenges. Despite a surge in income tax revenues driven by high-income earners and a stock market rally, the state faces a small $2 billion deficit. However, future years may see significant operating deficits due to high spending growth outpacing revenue increases. The budget lacks capacity for new commitments, and the state may need to address future deficits through spending cuts or tax increases.
Darden Restaurants reported a decline in same-store sales for the first time since the pandemic, despite an increase in net sales fueled by the acquisition of Ruth's Chris Steak House and other new restaurant locations. The company's overall same-store sales fell 1% in the quarter, with Olive Garden and other segments reporting declines, while LongHorn Steakhouse saw growth. Darden also updated its fiscal 2024 outlook, narrowing its earnings forecast and lowering its revenue and same-store sales projections.
Lumentum Holdings' stock dropped despite beating analyst targets for its fiscal second quarter of 2024, as the company's results, while better than expected, were still far from good. The company's sales fell 27.5% compared to the same quarter last year, with gross margin and operating losses worsening. CEO Alan Lowe attributed the poor results to "sluggish" carrier capital expenditures and warned of continued challenges throughout fiscal 2024. With flat to declining sales and earnings outlook, there is little compelling reason to own Lumentum stock at this time.
The Congressional Budget Office projects that the United States is on track to accumulate nearly $19 trillion in national debt over the next decade, largely due to the increasing costs associated with an aging population and higher interest expenses. However, recent legislation to reduce federal spending and a faster-than-expected growing economy have slightly improved the fiscal outlook, resulting in annual deficits over the next decade being 7 percent smaller than previously forecasted. Despite this, the nation is still expected to accumulate more debt as a share of its total economic output in 2034 than at any other time in its history.
Treasury auctions, which involve the sale of U.S. government bonds to fund operations, are causing concern in the markets due to their increasing size and scrutiny. Previously, it was assumed that investors would buy any number of bonds issued by the government, regardless of the fiscal outlook. However, the sale of $20.8 trillion of new Treasurys in the first 11 months of the year, on track to surpass 2020's record, is testing this assumption.
California's Legislative Analyst Office has announced that Gov. Gavin Newsom and state lawmakers will need to address a $68 billion budget hole when crafting next year's state budget. While not calling it a crisis, the Legislative Analyst suggested that Newsom consider declaring a budget emergency to tap into the state's rainy-day fund. The deficit, the largest in the state's history by dollar amount, could lead to deep budget cuts by next summer. State leaders have several tools to address the problem, including the $37.8 billion in reserves, but reducing education funding and halting the use of earmarked funds may be necessary. The economic weakness and revenue decline are attributed to factors such as an underperforming stock market, high inflation, and job losses in high-wage sectors. Negotiations on closing the budget gap will take place over the next few months.
While Federal Reserve Chair Jerome Powell is expected to hold interest rates steady, the US government's continued borrowing at higher rates will fuel deficits and debt, putting pressure on President Joe Biden and Democrats to reduce deficits. Political dysfunction is cited as a reason for pessimism about the fiscal outlook. The US Treasury's borrowing plans have come into focus as the government faces the possibility of a shutdown. Rising yields are also attributed to the mechanical reaction of more supply and fewer buyers, as the Fed shrinks its holdings of Treasury securities. The Fed's moves and the fiscal outlook are linked, and if rates stay high, it could slow economic activity. The resilience of the economy will determine the outlook for inflation and how long rates will remain high.
The US federal budget deficit for the 2023 fiscal year has reached $1.7 trillion, nearly double the previous year's deficit, due to slumping tax receipts, rising interest rates, and ongoing demand for expiring pandemic relief benefits. However, accounting adjustments related to a student loan forgiveness program proposed by President Biden last year artificially reduced this year's deficit. The widening gap between government spending and earnings comes at a challenging time as Congress debates federal spending levels and the Biden administration seeks aid for Israel and Ukraine. Concerns are growing about the sustainability of the current borrowing path, with the national debt surpassing $33 trillion and interest costs projected to become the nation's largest expenditure within three decades.