Tesla (TSLA) +2% Tesla shares bounced after a rough Monday, despite being down 36% in Q1 — the worst Q1 in company history. Investors are now eyeing its Q1 delivery report due Wednesday, with Street estimates hovering around 380,000 units . Analysts have been revising expectations lower amid backlash over Elon Musk’s role in Trump’s administration. Chinese EV Makers Up XPeng (XPEV) +1.6% : Delivered 33,205 vehicles in March — its fifth straight 30k+ month. NIO (NIO) +1.6% and Li Auto (LI) +1.4% also gained on strong March deliveries. Nvidia (NVDA) -0.6% Still under pressure after a 19.3% Q1 drop , its worst since 2022. Investor worries over AI spending, tech valuation, and trade tensions are weighing heavily. Johnson & Johnson (JNJ) -5% Fell after a Texas judge dismissed J&J’s third bankruptcy attempt to settle talc-related lawsuits via Chapter 11. PVH Corp (PVH) +18.9% Shares surged after Q4 earnings beat expectations ...
Key Takeaways:
Fiscal Strength Decline: Moody’s has highlighted a multi-year decline in the fiscal strength of the US, pointing out that the sovereign rating outlook was downgraded to negative in late 2023. The firm cites higher interest ratesas a significant factor that has reduced debt affordability, which is crucial for the country’s fiscal health.
Rising Debt Costs: The US Treasury yields have sharply increased since 2020, leading to higher interest payments, expected to rise to about 30% of revenue by 2035, up from 9% in 2021. This growing debt burden is projected to severely limit the US fiscal flexibility, making it harder for the country to manage its finances.
Declining Debt Affordability: Moody’s warns that while the US’s global economic strength and the central role of the dollar and Treasury bonds remain vital, the declining debt affordability could weaken the US's ability to manage its fiscal health. This challenge is exacerbated by sustained high tariffs, unfunded tax cuts, and other risks that could push US fiscal deficits wider.
Long-Term Outlook: The Congressional Budget Office will release updated estimates, but even in the best-case scenario, with sustained growth and spending cuts, US debt affordability is expected to remain weaker than other Aaa-rated sovereigns.
Debt Burden Projections: By 2035, Moody’s forecasts that the US debt burden will rise to around 130% of GDP, up from about 109% in 2024. This is significantly higher than the median Aaa-rated sovereign debt ratio, which stands at about 43%.
Interest Rates Forecast: Moody’s predicts that the 10-year Treasury yield will average 4.4% in 2025, before gradually declining to 4% by 2029, with a decline to 3% seen as unlikely in the near term.
Market Insight: Moody's report paints a concerning picture for the US fiscal future, with rising debt costs and weaker debt affordability expected to strain the nation's fiscal strength. While the US remains central to the global economy, the increasing burden of debt servicing poses a significant challenge for future growth and policy flexibility.
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