The Markets
Nobody likes to balance the budget.
Some pundits said Moody’s rating downgrade of U.S. Treasuries was a nothing burger. After all, the rating change didn’t provide investors with any new information. Moody’s was the third rating service to lower U.S. government bond ratings. S&P Global downgraded U.S. Treasuries in 2011, and Fitch Ratings followed suit in 2023.
However, Moody’s decision focused attention on fiscal policy – the way the United States government taxes and spends. In 46 of the past 50 years, the U.S. government has run a deficit, meaning it has spent more than it received from taxes and other sources of revenue, reported FiscalData. Every annual deficit adds to the public debt, which is about $36 trillion, according to the U.S. Debt Clock.
The U.S. government finances annual deficits (and the overall debt) by issuing Treasury bills, notes, and bonds. The U.S. promises Treasury buyers (a group that includes individuals, institutions, and governments) that it will pay interest for a specific period and then repay the amount borrowed.
When yields increase, so does the amount of interest the United States must pay.
When government bond buyers have concerns about a government’s fiscal policy, demand for bonds may fall and yields may rise. That happened to U.S. Treasuries last week. The yield on the 30-year U.S. Treasury bond exceeded five percent. “The move above 5 [percent] is striking because that has been the general cap on the 30-year for about two decades,” reported Karishma Vanjani of Barron’s.
While higher yields make U.S. Treasuries more attractive to investors, they also may create challenges for economic growth. “As the national debt grows and interest rates rise, the United States will spend more of its budget on the cost of servicing that debt – crowding out opportunities to invest in the economy,” reported The Peter G. Peterson Foundation.
The United States is already paying a hefty amount of interest. In 2024, interest payments on the U.S. debt were about $880 billion, more than the U.S. budget for national defense, reported Michael Mackenzie, Liz Capo McCormick, and Ye Xie of Bloomberg.
The U.S. isn’t the only country where yields are rising. “From the U.S. to Japan, long-term borrowing costs for the world’s biggest economies have surged as investors question the ability of governments to cover massive budget deficits,” reported Alice Gledhill and Mia Glass of Bloomberg.
Over the week, major U.S. stock indexes moved lower amid worries about rising yields and fiscal policy. Yields on longer maturities of U.S. Treasuries finished the week higher.
| Data as of 5/23/25 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
|---|---|---|---|---|---|---|
| Standard & Poor's 500 Index | -2.6% | -1.3% | 10.2% | 13.5% | 14.2% | 10.7% |
| Dow Jones Global ex-U.S. Index | 0.8 | 11.4 | 8.9 | 7.1 | 8.1 | 2.7 |
| 10-year Treasury Note (yield only) | 4.5 | N/A | 4.5 | 2.9 | 0.7 | 2.1 |
| Gold (per ounce) | 5.0 | 28.0 | 41.8 | 21.7 | 14.2 | 10.9 |
| Bloomberg Commodity Index | 1.7 | 4.0 | -2.3 | -8.1 | 10.1 | 0.2 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, MarketWatch, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
Where Do People Have the Best Quality of Life?
Countries often measure success by comparing how much their economies produce. The United Nation’s Human Development Index (HDI) considers success from a different perspective by measuring quality of life. The index focuses on three fundamental aspects of human development: length of life, access to knowledge, and income.
The 2025 HDI, which reflects data from 2023, showed that many wealthy nations (97 percent) have regained or improved on their pre-pandemic HDI scores, while just 60 percent of poorer nations have recovered, reported The Economist. The countries with the best quality of life were:
- Iceland,
- Norway and Switzerland (tied),
- Denmark,
- Germany and Sweden (tied).
The countries with the lowest quality of life were:
- Niger and Mali (tied),
- Chad,
- Central African Republic,
- Somalia, and
- South Sudan.
The United States ranked 17th in the Index, tied with Liechtenstein and New Zealand. In 2023, U.S. life expectancy at birth was 79.3 years, and Americans could expect to complete about 15.9 years of school. U.S. gross national income – the total amount of money earned by people and businesses in the U.S. – per capita was $73,650. The ranking “puts the country in the Very High human development category,” stated the UN report.
Weekly Focus – Think About It
“The true test of character is not how much we know how to do, but how we behave when we don’t know what to do.”
—John Holt, Educator
Wishing you and your families well,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management
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- Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
- Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
- The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
- All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
- The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
- The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
- Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
- The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
- The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
- International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
- Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
- Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
- Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
- Past performance does not guarantee future results. Investing involves risk, including loss of principal.
- You cannot invest directly in an index.
- Stock investing involves risk including loss of principal.
- The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts set forth may not develop as predicted and are subject to change. Investing involves risk including loss of principal.
- The Price-to-Earning (P/E) ratio is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means investors are paying more for each unit of net income, thus, the stock is more expensive compared to one with a lower P/E ratio.
- These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
- This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
- The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
- Consult your financial professional before making any investment decision.
Sources:
https://www.bloomberg.com/news/newsletters/2025-05-19/about-that-moody-s-downgrade? or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/05-27-25-Bloomberg-About-That-Moodys-Downgrade%20-%201.pdf
https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/sourceId/6802837
https://www.federalreserve.gov/faqs/money_12855.htm#:
https://fiscaldata.treasury.gov/americas-finance-guide/national-deficit/
https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/#:~:text
https://www.barrons.com/articles/global-bond-treasury-selloff-yields-7c33f4c1?mod=article_inline or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/05-27-25-Barrons-Global-Bond-Rout%20-%208.pdf
https://www.pgpf.org/our-national-debt/
https://www.bloomberg.com/news/articles/2025-05-21/treasury-yields-climb-auguring-5-rate-for-20-year-bond-auction or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/05-27-25-Bloomberg-Bond-Market-Warns-Trump%20-%2010.pdf
https://www.bloomberg.com/news/articles/2025-05-22/long-term-bond-yields-soar-globally-on-fiscal-policy-fears or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/05-27-25-Bloomberg-Long-Term-Bond-Yields%20-%2011.pdf
https://www.barrons.com/market-data?mod=BOL_TOPNAV or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/05-27-25-Barrons-DJIA-S&P-Nasdaq%20-%2012.pdf
https://hdr.undp.org/data-center/human-development-index#/indicies/HDI
https://www.economist.com/graphic-detail/2025/05/06/which-countries-have-the-best-and-worst-living-standards or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/05-27-25-Economist-Which-Countries-Best-Worst-Living-Standards%20-%2015.pdf
https://hdr.undp.org/data-center/country-insights#/ranks
https://hdr.undp.org/data-center/documentation-and-downloads or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/05-27-25-Human-Development-Reports%20-%2017.pdf
https://hdr.undp.org/data-center/specific-country-data#/countries/USA
https://www.goodreads.com/quotes/49110-the-true-test-of-character-is-not-how-much-we
ADV & Investment Objectives: Please contact The Dowling Group if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part II of Form ADV and is available for your review upon request.
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