Is a U.S. debt crisis really imminent? Yardeni weighs in

Investing.com -- Yardeni Research said in a note Tuesday that it shares the concerns of high-profile commentators warning of a looming U.S. debt crisis, but argued the reckoning is not yet at hand and that betting against stocks on that basis has proved costly.

The firm noted JPMorgan's Jamie Dimon has warned of "a crack in the bond market," while Ray Dalio has described the government's debt situation as "nearing the point of no return" and approaching a "death spiral."

Yardeni called both men smart and influential, but added that "anyone who has followed their consistently pessimistic outlook over the past few years has missed a huge rally in the stock market."

"We'll worry about the government's debt when the Bond Vigilantes do," the firm wrote, noting the 10-year Treasury yield remains between 4% and 5%, a range it calls the "old normal" consistent with a healthy economy, and below nominal GDP growth.

Yardeni acknowledged the fiscal picture is deteriorating, with total public debt surpassing $40 trillion in August and net interest outlays climbing above $1 trillion, on par with defense spending. It said the deficit is running near 6% of GDP, a level usually associated with recessions.

Still, the firm pointed to Treasury Secretary Scott Bessent's willingness to act on rising yields and Fed Chair Kevin Warsh's commitment to restoring price stability as reasons yields should stay contained.

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