CNN Business/Jeanne Sahadi
The US debt is now projected to be larger than the US economy

As the United States continues its struggle with the pandemic-induced economic recession and a sputtering recovery, the country’s burgeoning debt is not anyone’s top concern these days. Even deficit hawks are urging a dysfunctional Washington and a chaotic White House to approve another round of badly needed stimulus to the tune of trillions.

“The US federal budget is on an unsustainable path, has been for some time,” Federal Reserve Chairman Jerome Powell said this week. But, Powell added, “This is not the time to give priority to those concerns.” However, when the country eventually pulls out of its current health and economic crises, Americans will be left with a debt hangover.

On Thursday, the Congressional Budget Office estimated that for fiscal year 2020, which ended September 30, the US deficit hit $3.13 trillion — or 15.2% of GDP — thanks to the chasm between what the country spent ($6.55 trillion) and what it took in ($3.42 trillion) for the year.

As a share of the economy, the estimated 2020 deficit is more than triple what the annual deficit was in 2019. And it’s the highest it has been since just after World War II.

The reason for the huge year-over-year jump is simple: Starting this spring, the federal government spent more than $4 trillion to help stem the economic pain to workers and businesses caused by sudden and widespread business shutdowns. And most people agree more money will need to be spent until the White House manages to get the Covid-19 crisis under control.

The Treasury Department won’t put out final numbers for fiscal year 2020 until later this month. But if the CBO’s estimates are on the mark, the country’s total debt owed to investors — which is essentially the sum of annual deficits that have accrued over the years — will have outpaced the size of the economy, coming in at nearly 102% of GDP, according to calculations from the Committee for a Responsible Federal Budget.

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CNBC/Stephanie Landsman
Top J.P. Morgan advisor increases cash position, cites stimulus gridlock risks as major reason

J.P. Morgan Securities’ Colleen O’Callaghan is taking steps to protect portfolios from an economic setback. O’Callaghan warns the domino effect from coronavirus aid gridlock on Capitol Hill is the biggest risk facing Wall Street right now. As a result, she’s increasing cash exposure for her ultra-high worth clients.

“What we’ve been working to do is to reduce some of that equity exposure — sit in cash perhaps for a little bit,” the firm’s managing director and financial advisor told CNBC’s “Trading Nation” on Thursday.

O’Callaghan, who manages more than $3 billion in assets, is one of Barron’s top 20 women financial advisors and is on one of the nation’s top 50 private wealth management teams.

As a long-term investor, O’Callaghan’s goal is to tune out the day-to-day headlines and volatility in the market. But she acknowledges the elephant in the room right now is the stimulus, or lack thereof.

“It’s prudent to rebalance clients’ assets a bit, trim back some of those equities, increase the cash position and just let’s wait this out,” said O’Callaghan. “We really need to see that stimulus package. If we don’t see that stimulus, I do think there’s going to be more volatility.”

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Reuters/Eileen Soreng
Gold gains as easing dollar, U.S. stimulus hopes bolster appeal

Gold prices rose 1% on Friday, supported by a weaker dollar and optimism over a new U.S. coronavirus relief package after President Donald Trump said talks with Congress had restarted.

Spot gold gained 0.9% to $1,910.96 per ounce by 0310 GMT. It was up 0.7% for the week. U.S. gold futures were up 1.2% at $1,916.90.

The dollar index, which was down 0.2% against its rivals, was headed for a second straight weekly fall.

Renewed hopes for another fiscal stimulus pulled the dollar lower and raised expectations of a pick-up in inflation, said Howie Lee, an economist at OCBC Bank.

In an interview, Trump said there was a good chance a deal over COVID-19 relief could be reached, but gave no details of such a pact.

Gold, widely viewed as a hedge against inflation and currency debasement, has surged nearly 26% this year, boosted by unprecedented stimulus from governments and major central banks to cushion the pandemic’s economic impact.

“We expect gold prices to continue to gather strength as market volatility rises with the November U.S. presidential elections fast approaching, albeit with ebbs and flows,” Fitch Solutions said in a note.

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Kitco/Neils Christensen
A Biden victory will drive inflation and gold prices higher – Saxo Bank

The precious metals market is expected to be rife with volatility ahead of the Nov. 3 general election, but one market analyst said that prices could generally trend higher as investors price in the growing possibility of Democratic nominee Joe Biden becoming the next president.

In a recent comment to Kitco News, Ole Hansen, head of commodity strategy at Saxo Bank, said that gold prices could struggle in the near-term as markets continue to react to President Donald Trump shutting down any prospects of a comprehensive fiscal stimulus package; however, he added that gold could find a bid closer to the election if Bidden continues to solidify his lead in the race to the White House.

In a report published earlier this week, Hansen noted that markets could see a Biden victory as more inflationary, and that is what will ultimately propel gold prices higher.

Quoting, Saxo Bank ’s current strategists Hansen noted: “The argument here is that the Democrats are set to take back the presidency and the Senate, therefore paving the way for a massive multi-trillion stimulus passed in the first one hundred days of a Biden administration, taking U.S. inflation much higher while leaving the Fed policy rate pegged near zero.”

Hansen noted that investment demand in gold-backed exchange-traded products will continue to dominate the market and drive prices higher. He noted that investment demand remained strong through September even as prices saw a sharp decline.

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