Client Conversations
How to talk to clients about a debt ceiling showdown


The "debt ceiling," or maximum amount of debt that the U.S. Treasury can issue, makes its way into the news cycle every few years. As part of the U.S. Constitution, Congress must routinely raise the limit to meet increasing obligations. But when the Congress is divided, a standoff can occur — a game of "will they or won’t they?" — with the creditworthiness of the U.S. government at stake. 

Since the debt ceiling was established in the early 20th century, U.S. lawmakers have always reached agreement and increased the limit before any potential defaults could occur. But in recent years, Americans have witnessed increasingly contentious showdowns between political parties on whether or not to raise the debt ceiling.

Whether you consider the debt ceiling standoff to be political theater or a legitimate economic threat, your clients may have concerns about whether this latest showdown will impact the markets and their investment portfolios. As a financial professional, it’s important to be conversant in these topics in a way that takes their concerns seriously and reminds clients of the plan they have in place and the progress they have made toward long-term goals.

"One of the most difficult aspects of an advisor's job is managing clients through challenging times, keeping them from acting on instincts that may get in the way of their long-term goals," says Paul Cieslik, an advisor practice management consultant at Capital Group. "The debt ceiling debate may not factor in to your clients’ financial plans, but it offers a great opportunity to demonstrate your value and deepen relationships."

When these conversations come up, it helps to have a systematic and repeatable approach. For example: There are four steps to any effective client conversation, each with a distinct goal. "First, acknowledge where the client stands. Second, provide your perspective. Third, build confidence. And fourth, share any potential opportunities," Cieslik explains. This framework can be used in any discussion but is particularly useful in times of economic uncertainty or market volatility. 

Four steps to more effective conversations

Image shows a client conversation framework consisting of a four-box grid. The top left box features the words 'Acknowledge: empathize, listen and identify'; the top right box features the words 'Perspective: Share and educate'; the bottom left box features the words 'Confidence: Prioritize client goals'; and the bottom right box features the words 'Opportunity: Give action steps.'

Source: Capital Group.

Here’s how to talk to clients about the debt ceiling showdown in four easy, efficient steps.

Step 1: Acknowledge client concerns

In an increasingly unpredictable news cycle, it can be hard to separate legitimate worries from media hype. It’s natural for investors to have concerns about their portfolios. Simply acknowledging these fears and being ready to listen to clients’ concerns can be meaningful. 

"It starts with empathy," says Cieslik. "Check in before you step in. You want to let them know you take their concerns seriously. Let them feel heard."

Listening fully is key. Because the debt ceiling can be a politically divisive subject, take care to not presume their worries or jump to provide general reassurance. Ask questions to help identify and understand their specific concerns, for example, "What concerns you most?" Repeat back what you have heard in their own words: "What I am hearing you say is …"

Be honest. Given political brinksmanship, this showdown might be more prolonged than those in the past. Matt Miller, political economist at Capital Group, says this could be the worst standoff we’ve ever witnessed. You can offer a frank assessment. "We don’t know the outcome of this debate, or whether it will result in economic or market disruption. But we do know that we have been here before," says Cieslik. 

Step 2: Offer relevant perspective

Providing a greater context often helps investors process market ups and downs, and it can guide a conversation to a more productive outcome. When offering perspective on the debt crisis, you can approach the topic from a few different angles: We’ve been here before, the market is historically resilient and volatility is likely built into the investment strategy. Here are some talking points to help with each of those topics. 

We have been here before: As the saying goes, the further back you look, the further ahead you’ll see. Remind clients that these showdowns are not new. In fact, they have occurred often, under the control of both political parties, and have always been resolved before the government had to consider default. 

Debt ceiling showdowns occur regardless of who controls the White House

The image is a line graph showing the U.S. debt and debt limit in USD trillions versus party control in the White house for the years 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021 and 2022. Democratic presidencies are represented in blue from 1995 to 2000, 2008 to 2016 and 2020 to 2022. Republican presidencies are represented in red from 2000 to 2008 and from 2016 to 2020. A blue line is used to represent the U.S. statutory debt limit over time. The limit was $4.9 in 1995 and has risen to $31.4 trillion in 2022. A dotted reflects periods when the statutory limit has been suspended, specifically from February 4, 2013 - May 18, 2013, October 17, 2014 - March 31, 2017, September 30, 2017 - March 1, 2019 and August 2, 2019 - July 31, 2021.

Sources: Capital Group, Refinitiv Datastream, Standard & Poor's, U.S. Department of the Treasury, U.S. House of Representatives Office of the Historian, U.S. Office of Management and Budget. Periods in which the statutory limit has been suspended are reflected by a dotted line, namely from February 4, 2013 - May 18, 2013, October 17, 2014 - March 31, 2017,  September 30, 2017 - March 1, 2019 and August 2, 2019 - July 31, 2021. 

Perhaps the closest we’ve come to defaulting was in 2011, when political conflicts about raising the debt limit led Standard & Poor’s to downgrade the United States’ credit rating from AAA to AA-plus, where it remains. This and subsequent standoffs leading to government shutdowns in 2013 and 2018 disrupted markets for a period of days or weeks, but the markets soon recovered. Viewed over time, these showdowns did not tend to have a significant, long-term impact on investors. 

The chances of a technical default — which would occur if a bond payment is missed or delayed — are very low but not zero, says Tom Hollenberg, a Capital Group fixed income portfolio manager.

"It's important to make a distinction between the situation we are facing in the U.S. and something much worse, like an Argentina-style default, where investors lose their savings. Nobody seriously believes that will happen here," Hollenberg says. "In the U.S., the probability of even a technical default, or a delayed payment, is between 5% and 10%, in my view. It’s certainly not my base case, but it’s something I can’t ignore either."

The markets have been historically resilient: Even if this particular crisis is totally new, market volatility is not. "What we do know is investors who stay the course have historically benefited over the long run," states Cieslik. Well-managed companies adjust to shifting conditions, and ultimately the best companies have learned to thrive, even in times of crisis. Markets themselves have survived a great variety of disruptions in the past. 

"The U.S. remains the largest and most innovative economy in the world. This isn’t going to change that," adds Hollenberg. "If the market does get spooked, it could create potential buying opportunities, as it did in 2011 and 2013. If you take a long-term view, this should work itself out. It shouldn’t really distract from your investment goals," he says. 

Markets have powered through debt ceiling standoffs in the past

The image shows a line graph depicting the U.S. statutory debt limit in USD trillions on the right axis vs. the S&P 500 Index total returns on the left axis from 1995 to the present. The graph notes previous debt ceiling standoffs, specifically the 1995 U.S. government shutdown that lasted 21 days, with the debt limit at $4.9 trillion and the S&P 500 total return was 103.4; the September 11 attacks in 2001, when the debt ceiling was $5.9 trillion and the S&P 500 was at 184.7; the global financial crisis between 2006 -2007, with the debt ceiling at $8.97 and the S&P 500 at 290.4; the U.S. loss of AAA credit rating from S&P in 2011, the debt ceiling was at $14.69 trillion the S&P 500 at 262.2; the 2013 U.S. government shutdown that lasted 16 days the debt ceiling was $17.11 trillion and the S&P 500 was at 396.2; the U.S. government shutdown of 2018 that lasted 35 days the debt ceiling was $20.46 trillion and the S&P 500 return was 629.3. The graph ends at 3/31/2023, with the current debt limit is $31.4 trillion and the S&P 500 at 1109.9.

Sources: Capital Group, Refinitiv Datastream, Standard & Poor's, U.S. Department of the Treasury, U.S. Office of Management and Budget. Periods in which the statutory limit has been suspended are reflected by the dotted lines. These periods include February 4, 2013, through May 18, 2013; October 17, 2014, through March 31, 2017; September 30, 2017, through March 1, 2019; and August 2, 2019, through July 31, 2021. Data as of March 31, 2023. Past results are not predictive of results in future periods.

Volatility is part of the plan: Perhaps the most important message to reinforce is that market risks were factored into the decisions made so far. Even if the debt ceiling creates volatility in the market, remember that now is not the time to take impulsive action. Moving cash to the sidelines or taking your money out of the market on the way down means that if you don’t get back in at exactly the right time, you can’t capture the full benefit of a recovery.

Even missing a few trading days can take a toll. Consider an example of a hypothetical $10,000 investment in the S&P 500 Index , excluding dividends, from July 1, 2010 to June 30, 2023. An investment for the full period would have grown to $27,248. But missing even the 10 best days of the subsequent 10 years would have cut those gains by 45% to $14,922 — and the more missed "good" days, the more missed opportunities. It should be noted that investors cannot invest directly in an index. The index is unmanaged and, therefore, has no expenses. Additionally, past results are not predictive of results in future periods.

The strongest gains have often occurred immediately after a bottom. Therefore, waiting on the sidelines for an economic turnaround is not a recommended strategy. Cieslik suggests saying, "I’m not sure if we’re at a market bottom, but based on past results, I can tell you we’re probably not at a market top."

Step 3: Reinforce a feeling of confidence

"The confidence step is to remind the client with specificity that you know what matters to them," Cieslik says. "It's all about prioritizing goals and focusing on what you can control. Reassure the client that a plan is still in place, but it may be time to reconfirm priorities." For example, if market uncertainty creates anxiety, it may be time to reassess your risk profile or change savings behavior. 

He recommends getting the client talking about their goals and reminding them of the progress they have made. "Let them know: 'You have made smart, responsible decisions in managing your money, so now let's discuss what matters to you most: your goals,'" he says. Remind them that you developed these objectives together, perhaps during a calmer time. Discuss specific objectives clients established and reinforce that changes in market conditions likely haven’t changed their goals. 

Step 4: End with opportunity

Whether or not the debt ceiling showdown creates volatility in the markets, having this type of conversation offers a chance to guide clients to consider prudent and perhaps opportunistic financial moves. 

For example, it may be important to evaluate client allocations. Investors who have mostly experienced bull markets may need to reconsider risk, especially those who are within 10 years of their planned retirement date. 

There may also be opportunities to help clients rebalance a portfolio, increase savings, update plan beneficiaries and consider strategies that may look more attractive under the SECURE 2.0 Act. There may also be new investment opportunities worth considering, given existing risk parameters. 

Finally, even if the debt ceiling showdown goes down to the wire, stress the need for patience and prudence and the importance of staying the course. "Let them know, 'We’ve designed a plan to stay with in good times and bad,'" Cieslik says.

Debt ceiling FAQs

What is the debt ceiling? The debt limit, also known as the debt ceiling, is the total amount of money that the U.S. government is authorized to borrow to meet existing obligations. These include Social Security and Medicare benefits, military salaries and veterans’ benefits, debt interest, and tax refunds.

Why does the debt ceiling exist? It is stated in the U.S. Constitution that Congress must authorize borrowing. The debt limit was first instituted in the early 20th century to keep the Treasury from having to ask permission each time it issued debt.

How close are we to hitting the ceiling? The current debt limit of $31.4 trillion, set in December 2021, was passed in early 2023. By June of 2023, however, legislation suspended the debt ceiling limit until January 1, 2025.

How often has the debt ceiling been raised? Congress has acted 78 times to "permanently raise, temporarily extend or revise the definition of the debt limit" since 1960, according to the Treasury Department. It has been raised 49 times under Republican presidents and 29 times under Democratic presidents, by Congressional leaders in both parties. 

Has Congress ever failed to increase the debt limit? Despite many heated standoffs, Congress has always acted when called upon to raise the debt ceiling to meet the obligations of the U.S. government. 

What are the potential stakes of not raising the debt ceiling? Not increasing the debt limit could mean the federal government has to default — even temporarily — on its obligations. Bond holders are paid first, while salaries for government employees are more likely to be delayed. 

Sources: U.S. Treasury Department,, Committee for a Responsible Budget.

Learn more about
Client Conversations
Relationship Alpha

Securing a Strong Retirement Act of 2022 (SECURE 2.0) builds on the improvements made by the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) of 2019 with more than 90 changes affecting qualified retirement plans, IRAs, SIMPLEs, SEPs, ABLEs and 529 plans.


The S&P 500 Index is a market capitalization-weighted index based on the results of approximately 500 widely held common stocks.

The S&P 500 Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Capital Group. Copyright © 2023 S&P Dow Jones Indices LLC, a division of S&P Global, and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.

This material does not constitute legal or tax advice. Investors should consult with their legal or tax advisors.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.

All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.

Use of this website is intended for U.S. residents only. Use of this website and materials is also subject to approval by your home office.

American Funds Distributors, Inc.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

Never miss an insight

The Capital Ideas newsletter delivers weekly investment insights straight to your inbox.