#UsDebtRisk
๐บ๐ธ US Debt Nears $39 Trillion
This isn't as new as some might think. The debt-to-GDP ratio already exceeded 100% in 2020 during the COVID-19 pandemic, reaching approximately 126%. It continued to rise, projected to reach around 123% in 2025, before declining slightly to approximately 101% in 2026.
In my view, the market isn't as surprised by the size of the debt itself as it is by the rate of its increase. As borrowing increases, bond issuance increases, and if demand doesn't keep pace, yields tend to rise to achieve equilibrium.
This directly impacts asset classes: higher yields put pressure on stocks, especially growth stocks, while simultaneously providing temporary support for the dollar. Conversely, assets like Bitcoin and gold tend to benefit during times of anxiety and uncertainty.
The issue isn't simply exceeding 100%, but rather the trajectory of the debt and the persistent deficit. Any surprises in inflation or weak demand for bonds could quickly reprice the markets.
