Average Joe anxious to know: What happens if U.S. defaults?
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The normally quiet phones at BPU Investment Management were ringing off their hooks Thursday.
Calls poured in to the company's Downtown office all morning, as they had at the offices of financial consultants across the city. Most people had the same question: If the U.S. government defaults, what will happen to me?
"[Our clients] are not usually affected by headlines and market volatility, but this has probably been the most phone activity we've had since 2008," said Paul Brahim, managing director of wealth management at BPU.
As Congress works to negotiate a solution to the U.S. debt crisis and avoid an impending government default by the Tuesday deadline, the public can do little but watch and wait. The primary concern for some as the deadline ticks closer is the fate of life savings, investment portfolios and the health of the market. For others, it's a question of whether that next Social Security check will arrive.
Should Congress fail to reach a deal, people reliant on programs like Social Security and Medicare could see their financial support endangered as the government struggles to pay its bills. The reputation of U.S. government debt as an investment is also at stake, and the nation risks losing its nearly century-long triple-A credit rating, even if a default does not occur.
"Businesspeople feel paralyzed, people feel paralyzed, because they're just flat-out uncertain about the future," Mr. Brahim said. "When you lack certainty, there is an incapacity to be able to make decisions."
Financial consultants are advising people to stay the course with their investments, noting that the market until now has remained relatively stable. If anything, concerned investors can err on the side of caution, said Joe Balastrino, chief fixed income market strategist at Federated Investors, Downtown.
"Anytime one gets nervous, by definition, if it's keeping [him] up at night, [he] should get more conservative in [his] investment portfolio," Mr. Balastrino said.
Investors have generally remained level-headed in their investment decisions through the recent turmoil, said Mike Freker, a certified financial planner with AXA Advisers, Downtown, though the looming default has prompted many to re-examine their finances.
First Published July 29, 2011 12:00 am
