Why is this a good time to invest in the U.S.? Believe it or not, but it may be because of the deficit! Amid all the hand ringing and gnashing of teeth by politicians of both political parties over growth of the federal budget deficit, evidence suggests that right now may be the best time in a decade to be saving and investing.
Revisiting the bursting of the bubble
To fully appreciate why now may be a good time to invest in U.S. stocks despite record high deficits, it would be time profitably spent to revisit the spring of 2000 just before the tax deadline. The government was running a record budget surplus for the third straight year, and the stock market was at an all time high. During the week leading up to April 15 indices started to unfold, (see table below). One theory offered at the time to explain this pattern was that over the weekend people were learning from their accountants that that they owed taxes to the IRS. Anyone hearing this news who owned stocks could of...
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