Key points of this paper:
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America's public debt situation is a major issue for investment markets going forward. Currently it is in worse shape than Spain and Portugal and long term projections suggest it is on an unsustainable path.
Inflating its way out of the problem is not an option, so sooner or later significant fiscal austerity is likely in the US. This is likely to commence next year, though real action is unlikely until 2013. This is all likely to result in a constrained medium term growth outlook for the US.
For investors it likely means longer term downwards pressure on the US dollar, ongoing interest in hedges against a falling US dollar such as gold and the Australian/New Zealand dollars, an ongoing source of volatility for investment markets and constrained longer term returns for US shares compared to shares in emerging countries.