Investing

Despite mass layoff announcements at major tech companies this week, the overall job market remains strong, experts say.
That makes this a good time to be looking for a new position, even if unexpectedly.
Here are a few key considerations before kicking off a search.

Whether by choice or necessity, many workers will change jobs in the months ahead.
Some companies, particularly tech giants, have been announcing deep cuts to their workforces as they face ongoing challenges due to rising interest rates and inflation.

Most recently, Google said that it will lay off 12,000 people, Amazon announced a fresh wave of job cuts affecting more than 18,000 people, and Microsoft said it plans to lay off 10,000 workers amid fears of an oncoming recession.
At the same time, government data shows the U.S. labor market is still strong, with a record low unemployment rate of 3.5%.
Many industries continue to do very well, according to Barbara Safani, president of Career Solvers in New York. The tech layoffs don’t “necessarily reflect on the broader job market,” she said.
And the Federal Reserve has demonstrated it can raise rates without jeopardizing the robust labor market so far, Randy Frederick, managing director of trading and derivatives for Charles Schwab, recently told CNBC.
“If you can engineer a decline in inflation without crushing the jobs market, that’s the ‘Goldilocks’ soft landing,” he said. 

96% of workers will look for new job in 2023

In general, “the first quarter of the year is always a good time to look because fiscal budgets have been replenished,” Safani said. 
Overall, a whopping 96% of workers are looking for a new job in 2023, largely in search of better pay, according to a recent report by jobs site Monster.com. 
“This is phenomenally high,” even compared with the numbers at the height of the “great resignation,” said Vicki Salemi, career expert at Monster.
Nearly half, or 40%, of job seekers said they need a higher income due to inflation and rising expenses, Monster found. Others said they have no room to grow in their current role or that they are in a toxic workplace.
More from Personal Finance:Paid biweekly? Here are your 2 three-paycheck months in 2023If you want higher pay, your chances may be better nowWorkers still quitting at high rates
Job-switching is widely considered the best way to improve your career prospects and pay. In fact, the difference in wage growth for job switchers relative to those who stay in their current role is at a record high.
The latest data shows job switchers have seen 7.7% wage growth as of November, while workers who have stayed in their jobs have seen 5.5%, according to Daniel Zhao, lead economist at Glassdoor, citing data from the Atlanta Federal Reserve.

Key considerations when looking for a new job

For those kicking off a job search, Safani advises clients to consider how all aspects of a new position measure up.
“Really look at it holistically,” she said. “You may be getting paid more, but it’s important to vet that opportunity.” Other factors to consider include opportunities for advancement, flexibility and a healthy work-life balance.
“Do your research,” Salemi advised. “Find out what the benefits are, find out what the culture is like.”
“Workers can have both — a higher salary and a positive, healthy work environment.”
Subscribe to CNBC on YouTube.

WATCH LIVEWATCH IN THE APP More

The share of Americans who say they or a family member delayed medical treatment due to cost rose to 38% in 2022 from 26% in 2021, according to a Gallup poll.
That percentage is the highest since the polling organization began taking the measurement in 2001.
Are you struggling with health-care costs? Taking these steps can help, experts say.

Iona Studio | Istock | Getty Images

More people in the U.S. are deciding to hold off on medical care for financial reasons.
The share of Americans who say they or a family member delayed medical treatment due to cost rose to 38% in 2022 from 26% in 2021, according to the results of a Gallup poll released Jan. 17.

That percentage is the highest since the polling organization began taking the measurement in 2001, at which point 19% of people answered they’d postponed health care because of money. The latest result also marks the sharpest year-over-year increase in the survey’s history.
A large share of the delays in treatment last year were for health conditions that the respondents described as either somewhat or very serious.

“People are stretching out drugs and avoiding doctor visits for diabetes, heart disease and other chronic diseases, which can cause the problems to spiral out of control,” said Carolyn McClanahan, a certified financial planner and physician who is the founder of Life Planning Partners in Jacksonville, Florida.
If you are struggling with health-care costs, taking these steps can help, experts say.

1. Start with in-network providers

One way to save on medical expenses is to make sure your doctors are in network for your insurance plan, “as out-of-network care can be very expensive,” said McClanahan, a member of CNBC’s Financial Advisor Council. The same goes for hospitals, labs and other medical providers you anticipate using.

You can check with your insurer as well as the provider you’d like to see to find out if they’re in network. Sometimes, doctors leave a network, McClanahan said, so you want to check this again if you haven’t seen a provider in some time.
More from Personal Finance:4 key money moves in an uncertain economyWhy the price of smartphones, used cars and bacon deflated in 2022Evictions are picking up across the U.S.
“Always start with your primary care physician, where your copay or out-of-pocket cost will be lowest,” said Caitlin Donovan, a spokeswoman for the National Patient Advocate Foundation.

2. Make the most of reaching your deductible

Planning for care with consideration of your deductibles is another cost-saving strategy, McClanahan said.
Your deductible is the amount you have to pay for your health care before your coverage kicks in. The average single employee had a deductible of around $1,760 in 2022, according to the Kaiser Family Foundation.
If you reach your deductible, you might want to squeeze in other care or treatments within the same year to cut costs, McClanahan said.
Certain preventive care, including screenings and immunizations, are often covered without consideration of your deductible.

In fact, early detection for conditions like cancer can save your life.

Caitlin Donovan
a spokeswoman for the National Patient Advocate Foundation

Those who pass their out-of-pocket maximum for the year — the most you have to pay for covered services in a plan year — would especially benefit from seeking any other needed treatments within the year. They should be fully covered after that point, McClanahan said.
“For example, do you have skin lesions that you need checked? Do you have joint or muscle issues that could benefit from physical therapy? Is it time for your colonoscopy?” she said.

3. ‘Be an engaged patient’

Working to stay informed about your health and any necessary treatments, along with practicing a little skepticism about what you’re told by medical professionals, can also help keep down costs, McClanahan said.
“Be an engaged patient to make sure you get the appropriate care,” she said. “If a doctor wants to order a test or do a procedure, ask the following: ‘How will this test change what you do for me? If it isn’t going to change anything, does it really need to be done?'”
“Unnecessary testing adds costs and puts the patient at risk of false positive testing, which means the doctor has to do more tests to prove something isn’t wrong,” McClanahan said.

Often, she said, there are alternatives to possibly costly medications, tests and procedures. For example, in some cases, high cholesterol or high blood pressure can be turned around by dietary and lifestyle changes, she said.
Lastly, she advises patients to keep comprehensive histories of their medical records, including any procedures or tests they’ve had done, to cut down on needless and potentially expensive redundant ones down the road.

4. Seek help with costs

If you’re anticipating a hospital stay, review its website for information about financial assistance programs, Donovan said. “You may qualify for a reduced or even no-cost stay,” she said.
In some cases, you can set up a payment plan with a hospital or provider.
There are also a number of charitable organizations that assist people with their health-care costs, Donovan said. For example, at Copays.org, you can apply for funds to put toward copays, premiums, deductibles and over-the-counter medications.
The National Patient Advocate Foundation has a financial resource directory in which you can search for local aid for everything from dental care to end-of-life services.
Some older Americans may be eligible for assistance with their monthly premiums under the Medicare Savings Program, Donovan said. “If you qualify, your premiums, deductibles and copays will be covered, which would be an enormous financial relief for anyone,” she said.
In addition, those enrolled in Medicare Part D, which covers prescriptions, should look to see if they qualify for Extra Help. That program can reduce the costs related to your drugs, Donovan added.
But the last thing you want to do is put off taking care of yourself, she said.
“Getting onto a treatment plan immediately may delay the debilitating effects of a condition, like muscle degeneration,” Donovan said. “In fact, early detection for conditions like cancer can save your life.”

WATCH LIVEWATCH IN THE APP More

If debt ceiling negotiations are unsuccessful, the U.S. could default on its debt.
Here’s why some worry that could result in Social Security and Medicare delays, and proposals for cuts to those programs.

The clock is ticking for the U.S. to avoid a default on its debt, and some are sounding the alarm about potential disruptions to Social Security and Medicare.
On Thursday, Jan. 19, the U.S. outstanding debt hit its statutory limit.

The debt limit or debt ceiling is the total amount of money the U.S. can borrow to meet its legal obligations including Social Security and Medicare benefits, as well as military salaries, tax refunds, interest on the national debt and other payments.
In a Jan. 13 letter, Treasury Secretary Janet Yellen warned House Speaker Kevin McCarthy, R-Calif., Senate Majority Leader Chuck Schumer, D-New York, and other congressional leaders of the possible “irreparable harm” that could come to the U.S. economy, Americans’ livelihoods and global financial stability if the problem goes unresolved.
“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” Yellen wrote.

izusek | E+ | Getty Images

On Thursday, the U.S. began taking “extraordinary measures” to avoid defaulting on its obligations, Yellen wrote in an updated letter to congressional leaders.
The Treasury Department cannot provide an estimate of how long the government can expect to pay the government’s obligations through extraordinary measures, according to Yellen. But it is unlikely that cash will be exhausted before early June, she said.

Negotiations over the federal debt ceiling mark one of the first big challenges the new Congress will face.
McCarthy has agreed to tie lifting the debt ceiling to spending cuts. That has advocates for Social Security and Medicare worried that lawmakers will try to amend those programs.
“We’re looking at as early as June for a train wreck on this issue,” said Dan Adcock, director of government relations and policy at the National Committee to Preserve Social Security and Medicare.
“The consequences are dire, because a default would not only disrupt Social Security and Medicare benefits, but also cause a global economic recession or worse,” he said.

How benefit payments could be delayed

If the U.S. were to default on its debt, it would be unprecedented.
The big question is whether the Treasury Department would be able to prioritize what does and does not get paid if that occurs.
Unlike a government shutdown, where Social Security and Medicare benefits continue to flow, that may not be the case with a default, according to Adcock.
“There’s a good chance that benefits for retirees and people with disabilities and survivors would be disrupted,” he said.
Even a short delay could interfere with beneficiaries’ ability to pay for health care, food, rent, utilities or other necessary expenses, the National Committee to Preserve Social Security and Medicare said in a statement on Thursday.

Halfpoint Images | Moment | Getty Images

The Treasury Department may be able to prioritize some payments, and that would include Social Security, said Jason Fichtner, chief economist at the Bipartisan Policy Center who previously served in several senior roles at the Social Security Administration.
However, the Social Security Administration may delay payments to ensure it has enough cash on hand, he said.
Meanwhile, Medicare payments may fluctuate, while other areas like federal employee salaries and food benefits through SNAP (the Supplemental Nutrition Assistance Program) may stop. The process may be politically “messy,” Fichtner said.
“Social Security I’m sure will get paid, interest on the debt will get paid,” he said. “After that, flip a coin, who gets paid?”

Why some worry about Social Security benefit cuts

As House Republicans plan to focus on curbing government spending, some worry that could entail cuts to Social Security benefits and Medicare in exchange for votes to increase or suspend the debt limit.
Among the ideas Republicans have pitched include raising Social Security’s full retirement age to 70, changing the way benefits’ annual cost-of-living adjustments are measured to make them less generous, or making it so benefits are means tested through the middle class, Adcock said.
Moreover, they could raise the Medicare eligibility age to 67 from 65, he said.
To make those changes, there would need to be enough support in the Senate, with 60 votes.
“That’s a pretty high threshold,” Adcock said. “I don’t think there would be 60 votes in the Senate to do benefit cuts.”
More from Personal Finance:4 key money moves in an uncertain economyHere’s the best way to pay down high-interest debt63% of Americans are living paycheck to paycheck
The White House has also indicated it is not willing to negotiate.
“As President Biden has made clear, Congress must deal with the debt limit and must do so without conditions,” White House press secretary Karine Jean-Pierre said Tuesday.
For Social Security reform to progress successfully, both parties would need to come to the table and be willing to make concessions, Fichtner said.
Without such a bipartisan legislative proposal on paper by June, it would be difficult to include Social Security in the debt ceiling negotiations, he said.
“With Social Security, you’re going to have to have a grand bargain that includes changes to the benefit formula and revenue increases,” Fichtner said.
“And that’s just not something that they can get done in a debt crisis environment,” he said.

WATCH LIVEWATCH IN THE APP More

The average price for a used car was $30,899 last month, according to CoPilot.
That amount is $7,146 more than if projected depreciation forecasts had held true.
Some models’ prices have dropped more in recent months than others.

Fotostorm | E+ | Getty Images

There’s still a ways to go before used car prices come back down to earth.
While prices were 8.8% lower in December from a year earlier, consumers continue to pay more for used cars than they would if typical depreciation expectations were in play, according to car-shopping app CoPilot, which tracks those price premiums in a monthly report.

related investing news

Last month, the average price for a used car was $30,899, according to CoPilot. That amount is $7,146 (or 30%) more than if projected depreciation forecasts had held true. However, the price is headed in the right direction for consumers: Six months ago, the app estimated, car buyers were paying about $10,000 above “normal.”
More from Personal Finance:4 key money moves to make in an uncertain economy2022 was the worst-ever year for U.S. bondsHow to balance retirement and emergency savings
“With the average price premium still at 30%, used car prices in America still have a long way to fall before they return to normal,” CoPilot’s report notes.
Demand in the used car market skyrocketed during the pandemic as supply chain issues hampered automakers’ ability to produce new vehicles. That situation is now easing, with modest improvements in dealer inventory as rising interest rates put pressure on affordability. The average price of a new car is $46,382, according to an estimate from J.D. Power and LMC Automotive.

The average interest rate on a used car loan is 10.25%

Yet turning to a used car generally doesn’t yield a better rate when financing. The average interest rate on a used car loan was 10.25% in December, compared with 6.68% to finance a new vehicle, according to Edmunds. That compares with 7.4% and 4.1%, respectively, a year earlier.

In addition, the rate you pay is partly based on your credit score — the higher that three-digit number, the lower the rate you can qualify for.
And, of course, the price depends on the specifics of the car itself.

Nearly new cars are $9,606 above ‘normal’

By age, nearly new vehicles (1 to 3 years old) have an average listing price of $40,273, which is $9,606, or 31%, more than the projected normal amount of $30,667, according to the CoPilot index.

In the 4- to 7-year-old range, the average price is $29,400, an amount that’s $6,731, or 30%, more than the “normal” price of $22,669. Vehicles 8 to 13 years old come with an average price of $18,018, or $4,621 more (about 35%) than the previously forecast $13,397.

Used cars with the biggest price drops

Some car prices have dropped more than others. The chart below shows the 10 used cars whose prices fell the most in two months (September to December), according to iSeeCars.

Meanwhile, the squeeze on new car production during the last couple of years may serve as a headwind in the used car market going forward.
“Inventory shortages of new cars in 2021 and 2022 mean that there are noticeably fewer [of those] model-year vehicles on the road today that will become used cars in the future,” said Joseph Yoon, consumer insights analyst for Edmunds.

Additionally, Yoon said, many 1- to 3-year-old cars that end up at dealerships for sale are leased cars that were returned, and the number of customers leasing their cars has dropped to 16% in December from 29% two years earlier.
“Rental fleets also suffered dramatically from new vehicle shortages, further reducing a reliable stream of late-model used vehicles for consumers to choose from,” Yoon added.

WATCH LIVEWATCH IN THE APP More

Higher credit scores pave the way to lower rates, potentially saving thousands of dollars in interest charges.
The highest tier is anything over 800, which can unlock even better terms.
Here’s a breakdown of how your credit score is calculated and ways you can improve it.

Generally speaking, the higher your credit score, the better off you are when it comes to getting a loan.
FICO scores, the most popular scoring model, range from 300 to 850. A “good” score generally is above 670, a “very good” score is over 740 and anything above 800 is considered “exceptional.”

Once you reach that 800 threshold, you’re highly likely to be approved for a loan and can qualify for the lowest interest rate, according to Matt Schulz, LendingTree’s chief credit analyst. 
More from Personal Finance:Here’s the best way to pay down high-interest debt63% of Americans are living paycheck to paycheck’Risky behaviors’ are causing credit scores to level off
There’s no doubt consumers are currently turning to credit cards as they have a harder time keeping up with their expenses and there are a lot of factors at play, he added, including inflation. But exceptional credit is largely based on how well you manage debt and for how long.
Earning an 800-plus credit score isn’t easy, he said, but “it’s definitely attainable.”

Why a high credit score is important

The national average credit score sits at an all-time high of 716, according to a recent report from FICO.

Although that is considered “good,” an “exceptional” score can unlock even better terms, potentially saving thousands of dollars in interest charges. 
For example, borrowers with a credit score between 800 and 850 could lock in a 30-year fixed mortgage rate of 6.13%, but it jumps to 6.36% for credit scores between 700 and 750. On a $350,000 loan, paying the higher rate adds up to an extra $19,000, according to data from LendingTree.

4 key factors of an excellent credit score

Here’s a breakdown of four factors that play into your credit score, and ways you can improve that number.
1. On-time payments
The best way to get your credit score over 800 comes down to paying your bills on time every month, even if it is making the minimum payment due. According to LendingTree’s analysis of 100,000 credit reports, 100% of borrowers with a credit score of 800 or higher paid their bills on time, every time. 
Prompt payments are the single most important factor, making up roughly 35% of a credit score.
To get there, set up autopay or reminders so you’re never late, Schulz advised.
2. Amounts owed
From mortgages to car payments, having an exceptional score doesn’t mean zero debt but rather a proven track record of managing a mix of outstanding loans. In fact, consumers with the highest scores owe an average of $150,270, including mortgages, LendingTree found.
The total amount of credit and loans you’re using compared to your total credit limit, also known as your utilization rate, is the second most important aspect of a great credit score — accounting for about 30%. 
As a general rule, it’s important to keep revolving debt below 30% of available credit to limit the effect that high balances can have. However, the average utilization ratio for those with credit scores of 800 or higher was just 6.1%, according to LendingTree.
“While the best way to improve it is to reduce your debt, you can change the other side of the equation, too, by asking for a higher credit limit,” Schulz said.
3. Credit history
Having a longer credit history also helps boost your score because it gives lenders a better look at your background when it comes to repayments.
The length of your credit history is the third most important factor in a credit score, making up about 15%.
Keeping accounts open and in good standing as well as limiting new credit card inquiries will work to your advantage. “Lenders want to see that you’ve been responsible for a long time,” Schulz said. “I always compare it to a kid borrowing the keys to the car.”
4. Types of accounts and credit activity
Having a diversified mix of accounts but also limiting the number of new accounts you open will further help improve your score, since each make up about 10% of your total.
“Your credit mix should involve more than just having multiple credit cards,” Schulz said. “The ideal credit mix is a blend of installment loans, such as auto loans, student loans and mortgages, with revolving credit, such as bank credit cards.” 
“However, it’s very, very important to know that you shouldn’t take out a new loan just to help your credit mix,” he added. “Debt is a really serious thing and should only be taken on as needed.”
Subscribe to CNBC on YouTube.

WATCH LIVEWATCH IN THE APP More

The share of people who said not being financially literate cost them more than $10,000 is up from 11% in 2021, according to a new report.
Most respondents say it cost them under $500, if at all.
Advocates say research shows the importance of teaching personal finance in the classroom before students reach adulthood and face a multitude of financial decisions.

domoyega | E+ | Getty Images

When it comes to money matters, what you don’t know can hurt you.
A report from the National Financial Educators Council shows that 38% of individuals in a recent survey said their lack of financial literacy cost them at least $500 in 2022, including 15% who said it set them back by $10,000 or more. That’s up from about 11% in 2021.

The majority (68%) of respondents said poor financial literacy cost them somewhere from zero to $499.
The average cost was $1,819, according to the survey, which was conducted Oct. 23 through Dec. 5 among about 3,000 adults across the country. That 2022 figure is nearly $500 higher than the average $1,389 in 2021.
More from Personal Finance:4 key money moves to make in an uncertain economy2022 was the worst-ever year for U.S. bondsHow to balance retirement and emergency savings
“A lot of people come out of [school] without having been taught financial literacy in any detail,” said certified financial planner Denis Poljak, a partner with the Poljak Group Wealth Management at Steward Partners in Shreveport, Louisiana.
“They end up just … learning from their mistakes,” Poljak said.

U.S. adults have big gaps in their financial knowledge

Financial literacy — which generally means understanding money topics ranging from income, budgeting, saving and investing, as well as how interest rates work and why credit scores matter — is lacking among many U.S. adults, studies show.
For instance, adults correctly answered, on average, 50% of the 28 basic money questions in the 2022 TIAA Institute-GFLEC Personal Finance index, the sixth annual barometer of financial literacy. Worse, the share of respondents (23%) who couldn’t correctly answer more than seven is higher than its been than any other year in the survey.
The problem, say experts, is the lack of knowledge can affect everything from how much you save — whether for emergencies or the long term (i.e., retirement) — to how much debt you take on and under what terms.

Financial literacy is ‘a key tool in the toolkit’

Advocates of financial literacy say the teaching needs to start before teens reach their high school graduation. As of last year, 24 states require personal finance coursework by grade 12, according to the nonprofit Council for Economic Education. 
“There’s good data showing people make better decisions when they have financial literacy,” said Nan Morrison, CEE president and CEO.

For example, Morrison said, you’ll likely have a better credit score and be less likely to default on a loan if you have some personal finance know-how. A 2015 study from the Financial Industry Regulatory Authority’s Investor Education Foundation bears that out: Three years after personal finance education was implemented in Georgia, Texas and Idaho, all three states saw severe delinquency rates go down and credit scores rise. 
Additionally, in 2021, individuals who scored above the median on a seven-question financial literacy quiz were more likely to make ends meet, according to the FINRA foundation’s latest financial-capability study. Specifically, they spent less than their income (53% versus 35%) and had three months’ worth of emergency funds at higher levels (65% versus 42%).
They also were more likely to have calculated their retirement savings needs (52% versus 29%) and to have opened a retirement account (70% versus 43%), according to the study.
“To me, the bottom line is that to live the life you want to live, you need to understand how to manage money,” Morrison said. “It’s not the only important thing, but it’s a key tool in the toolkit.”

WATCH LIVEWATCH IN THE APP More

A record amount of funds flowed into money market accounts as the year ended. Those funds could be the fuel for a major stock rally.
The Investment Company Institute said money market accounts held a record $4.814 trillion in the week ended Jan. 4.
But strategists say investors may hold back from putting more money into stocks, since sentiment is sour and money markets are now generating more return than they have been in years.

Dollar banknotes.
Simpleimages | Moment | Getty Images

Investor cash holdings are near record highs, and that could be good news for stocks since there is a wall of money ready to come right back into the market.
But the question is this: Will those investors return any time soon, especially with sentiment still so sour and stocks at risk of a major selloff?

related investing news

Total net assets in money market funds rose to $4.814 trillion in the week ended Jan. 4, according to the Investment Company Institute. That eclipses the prior peak of $4.79 trillion during May 2020, back in the earlier months of Covid-19.
These sums include money market fund assets held by retail and institutional investors.
The level of assets in these money market funds has come off the highs since the start of the year, but Wall Street has already noticed the cash pile.
“It’s a mountain of money!” wrote Bank of America technical research strategist Stephen Suttmeier. “While this seems contrarian bullish, higher interest rates have made holding cash more attractive.”

Staying in a holding pattern while earning income

Investors, worried about earnings and interest rates, may be willing to wait before they put more money into stocks. At the same time, money market funds are actually generating a few percentage points of income for the first time in years.

That means investors may be finding a safer way to generate some return while they wait for the right moment to invest. Consider that sweep accounts, where investors hold unused cash balances in their brokerage accounts, can park those amounts in money market mutual funds or money market deposit accounts.
Cresset Capital’s Jack Ablin said the change in behavior toward money markets reflects a bigger shift in the investing environment.
“Cash is no longer trash. It’s paying a reasonable interest and so it makes the hurdle higher over which the risky assets have to jump to generate an additional return,” Ablin said.
Julian Emanuel, senior managing director at Evercore ISI, said the surge into money markets was a direct result of selling stocks at year end.
“If you look at the flow data for the middle of December, liquidations were on the order of March 2020,” he said. “In the short-term, it was a very contrarian buy signal. To me this was people basically selling the market at the end of the year, and they just parked it in the money market funds. If the selling continues, they’ll park more.”

In search of relatively safe yield

Emanuel said anecdotally, he is seeing signs of investors moving funds from their lower paying savings accounts to their brokerage accounts, where the yields can be close to 4%.
Be aware that money market accounts issued by banks are insured by the Federal Deposit Insurance Corporation, while money market mutual funds are not.
Still, with December’s inflation rising at a 6.5% annual rate, higher prices for consumers are chiseling away at any gains.
Ablin said the change in investor attitudes about money market funds and also fixed income came with Federal Reserve interest rate hikes. Since last March, the Fed has raised its fed funds target rate range from zero to 0.25% to 4.25% to 4.50%. Those money market funds barely generated interest prior to those rate hikes.
For instance, Fidelity Government Money Market Fund has a compounded effective yield of 3.99%. The fund generated a 1.31% return in 2022.
Ablin said bonds have become attractive again for investors seeking yield.
“We like the fact that the bond market is finally carrying its own weight after years and years,” he said. “From that perspective, you would expect a rebalance away from equities into bonds. They’ve essentially been fighting equities with one hand tied behind their back for 10 years or more.”

WATCH LIVEWATCH IN THE APP More

Treasury Secretary Janet Yellen said the U.S. would likely hit its $31.4 trillion debt ceiling on Thursday.
The debt ceiling is the amount of money the U.S. is authorized to borrow to pay its bills. Since the cost of government operations generally exceeds federal tax revenues, the U.S. must raise money by selling Treasury bonds. The government can’t do this after hitting the debt ceiling.
If the U.S. ultimately can’t pay its bills, it will default on its debt. That’s only happened once in U.S. history — and seemingly by mistake. Another default would mean likely recession and financial crisis, economists said.

The U.S. may be about to hit its debt ceiling.
Treasury Secretary Janet Yellen said last week that the U.S. would likely hit the ceiling Thursday. Absent steps taken by Congress, the event may “cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” she wrote in a letter to new House Speaker Kevin McCarthy, R-Calif.

Here’s what the debt ceiling is, and what makes it so important for consumers.

What is the debt ceiling?

The debt ceiling is the amount of money the U.S. Treasury is authorized to borrow to pay its bills.
Those obligations include Social Security and Medicare benefits, tax refunds, military salaries and interest payments on outstanding national debt.
The current ceiling is about $31.4 trillion. Once it’s hit, the U.S. is unable to increase the amount of its outstanding debt — and paying its bills becomes trickier.
More from Personal Finance:4 key money moves in an uncertain economyWhy the price of smartphones, used cars and bacon deflated in 2022Evictions are picking up across the U.S.

“Not unlike many households, the government is reliant on debt to fund its obligations,” said Mark Hamrick, a senior economic analyst at Bankrate. “And like many households, it doesn’t have sufficient income to fund its expenses.”
The debt ceiling wouldn’t be an issue if U.S. revenues — i.e., tax proceeds — exceeded its costs. But the U.S. hasn’t run an annual surplus since 2001 — and has borrowed to fund government operations each year since then, according to the White House Council of Economic Advisers.

Why is the debt ceiling an issue right now?

While the U.S. is expected to reach its $31.4 trillion borrowing cap on Thursday, this in and of itself isn’t the major issue.
The Treasury has temporary options to pay bills: It can use cash on hand or spend any incoming revenues, such as those during tax season, which starts Jan. 23.
It can also use so-called “extraordinary measures,” which free up money in the short term. The Treasury will start using such measures this month, Yellen said. They include a redemption or suspension of investments in certain federal retirement and disability funds. The funds would be made whole later.
These maneuvers are meant to prevent a potential calamity: a default.

A default would occur if the U.S. runs out of money to meet all its financial obligations on time — for instance, missing a payment to investors who hold U.S. Treasury bonds. The U.S. issues bonds to raise money to finance its operations.
The U.S. has defaulted on its debt just once before, in 1979. A technical bookkeeping glitch resulted in delayed bond payments, an error that was quickly rectified and only affected a small share of investors, the Treasury said.
However, the U.S. has never “intentionally” defaulted on its debt, CEA economists said. This outcome is the one Yellen warned would cause “irreparable harm.” The scope of negative shockwaves is unknown since it hasn’t happened before, economists said.  
“The fallout is serious,” said Mark Zandi, chief economist at Moody’s Analytics.
“It would create chaos in financial markets and completely undermine the economy,” he added. “The economy would go into a severe recession.”

Fallout: Frozen benefits, a recession, pricier borrowing

An exact default date is difficult to pinpoint, due to the volatility of government payments and revenues. But it’s unlikely to happen before early June, Yellen said.
Congress can raise or temporarily suspend the debt ceiling in the interim to avert a debt-ceiling crisis — something lawmakers have done many times in the past. But political impasse calls their ability or willingness to do so into question this time around.   

[A default] would create chaos in financial markets and completely undermine the economy.

Mark Zandi
chief economist at Moody’s Analytics

If the U.S. were to default, it would send several negative shock waves through the U.S. and global economies.
Here are some of the ways it could affect consumers and investors:
1. Frozen federal benefits
Tens of millions of American households might not get certain federal benefits — such as Social Security, Medicare and Medicaid, and federal aid related to nutrition, veterans and housing — on time or at all, the CEA said. Government functions such as national defense may be affected, if the salaries of active-duty military personnel are frozen, for example.
2. A recession, with job cuts
Affected households would have less cash on hand to pump into the U.S. economy — and a recession “would seem to be inevitable” under these circumstances, Hamrick said. Recession would be accompanied by thousands of lost jobs and higher unemployment.
3. Higher borrowing costs
Investors generally view U.S. Treasury bonds and the U.S. dollar as safe havens. Bondholders are confident the U.S. will give their money back with interest on time.
“It’s sacrosanct in the U.S. financial system that U.S. Treasury debt is risk-free,” Zandi said.
If that’s no longer the case, ratings agencies would likely downgrade the U.S.’ sterling credit rating, and people will demand much higher interest rates on Treasury bonds to compensate for the additional risk, Zandi said.
Borrowing costs would rise for American consumers, since rates on mortgages, credit cards, auto loans and other types of consumer debt are linked to movements in the U.S. Treasury market. Businesses would also pay higher interest rates on their loans.
4. Extreme stock market volatility
Of course, that’s assuming businesses and consumers could get credit. There might also be a “severe” financial crisis if the U.S. government is unable to issue additional Treasury bonds, which are an essential component of the financial system, Hamrick said.
“A default would send shock waves through global financial markets and would likely cause credit markets worldwide to freeze up and stock markets to plunge,” the CEA said.
Even the threat of a default during the 2011 debt ceiling “crisis” caused Standard & Poor’s (now known as S&P Global Ratings) to downgrade the credit rating of U.S. and generated considerable market gyrations. Mortgage rates rose by 0.7 to 0.8 percentage points for two months, and fell slowly thereafter, the CEA said.

WATCH LIVEWATCH IN THE APP More