US fiscal debt liabilities top market concerns, Fed reports

U.S. market’s concerns regarding the sustainability of fiscal debts top the list in a survey of financial stability risks as gross national debt surpassed $35.9 trillion by November, the Federal Reserve reports. “Increasing Treasury issuances might begin to crowd out private investments or limit policy responses during an economic downturn,” the Fed report states.

The Fed’s Financial Stability Report, released on Saturday, shared insights of 24 market contacts in “Survey of Salient Risks to Financial Stability.” The result indicates concerns regarding Middle East tensions and policy uncertainties follow fiscal debt risks during Fall 2024 over the next 12 to 18 months, signifying the U.S.’s unstable political sphere.

Report highlights that the risk of the U.S. entering a recession is among the top concerns, while risks related to persistent inflationary pressures and restrictive monetary policy—frequent mentions in five out of the last six surveys—have been cited less frequently this time.

The Federal Reserve also added risks related to global trade have been mentioned more frequently compared to the previous survey. Although corrections in risky asset prices and renewed banking sector stress are not as prominent, they continue to be raised.

Moreover, the Fed report identifies the potential further weakening of China’s economy and the possibility of a cyberattack targeting a financial institution as risks that could have severe consequences if they materialize.