Handling Money
Photo by Alexander Mils on Unsplash
The U.S. federal government appears on the verge of a deal to increase its debt ceiling in time to avoid default on its loans, but in case the deal doesn't go through, a consistent long-term strategy among United Methodist investors remains the best bet, says one of the denomination's financial experts.
Joe Halwax, managing director of institutional investment services with Wespath Benefits and Investments, told United Methodist Insight in mid-May that the agency began looking at the possibility of a U.S. debt default – caused by Congress failing to raise the country's "debt ceiling," or the amount of debt it's allowed to carry – back in February this year.
"As we’ve stated numerous times in our blogs and elsewhere, Wespath is a long-term investor," Mr. Halwax wrote in a recently updated blog post. "We try to be conscious of all possible market events, and the potential for esoteric outcomes like another 2011 debt ceiling battle is something we will watch closely."
Not only Americans, but all people globally are right to be concerned about the debt ceiling tug-o'-war, say financial experts such as those quoted recently by The Washington Post. Another source, The Conversation, interviewed banking leaders and the Federal Reserve, finding those entities are "preparing war rooms and planning speedy bailouts."
A debt-ceiling deal reached over the Memorial Day weekend still must be approved by Congress before June 5, the date when the United States would run out of money to pay its existing debts. Among the items included in the deal according to the May 30 Washington Post are
- No increases in domestic programs;
- Reduces some money for the IRS;
- Slightly increases funding for military, veterans' affairs.
Before the May 27 announcement of the debt-ceiling deal, Mr. Halwax said Wespath doesn't react to short-term economic events but holds to a consistent long-term investment strategy.
"If there is a disruption, we expect it would be resolved fairly quickly and would respond to any potential dislocation by rebalancing to our target allocations accordingly," Mr. Halwax wrote in his post. "Our active asset managers do have the ability to tactically reposition their portfolios and could be more opportunistic if the negotiations cause volatility. But our focus has been—and will continue to be—to ensure our globally diversified portfolios are resilient across market cycles, and to provide our participants and institutional investors with options that balance their unique risk/return considerations."
However, Mr. Halwax cautioned that in 2011 Congress allowed the federal government to shut down for two weeks, interrupting payments of benefits and causing Standard & Poor's, the stock rating agency, to downgrade long-term U.S. treasury bonds from the top AAA rating to AA rating. The government hasn't recovered its triple-A rating to date, he noted.
Wespath also manages financial assets and retirement funds for the 13 United Methodist boards and agencies along with those of many annual conferences, and other Wesleyan denominations such as the African Methodist Episcopal Church and the fledgling Global Methodist Church. As of December 31, 2022, the agency managed over $24 billion; it maintains one of the largest faith-based pension funds in the world.
Negotiations over the debt ceiling are worrying not just U.S. investors, according to Heather Cox Richardson, a political historian at Boston College who puts the news in context in a daily blog, "Letters from an American." On May 19 she wrote;
"The Republicans’ threat to blow up the U.S. economy—and, with it, the global economy—comes at a time when the economy is, in fact, quite strong and President Biden’s measures have significantly reduced the deficit after Republican tax cuts exploded it. Destroying the economy on Biden’s watch would undoubtedly help to hamstring his reelection campaign. It would also kill popular support for his return to a government that supports ordinary Americans rather than concentrating wealth at the top of the economy, as Republicans insist—contrary to economic studies—will expand the economy and benefit everyone."
While the Bible counsels "fear not," an ancient Arabic saying attributed by Islamic scholar Al-Tirmidhi to the prophet Mohammed also metaphorically summarizes a reliable way to weather current U.S. economic turmoil: "Trust in God, but tie your camel."
Veteran award-winning religion journalist Cynthia B. Astle serves as Editor of United Methodist Insight, an online news-and-views journal she founded in 2011 as a media channel to amplify the voices of marginalized and under-served United Methodists.