Don’t let debt fears derail market perspective

The resilience of household wealth, credit markets and corporate earnings means that higher debt and interest rates need not derail the equity bull market in the near term.

• US federal debt rose from about $20 trillion to $40 trillion, but household net worth increased from approximately $80 trillion to about $174 trillion over roughly the same period.
• The 10-year Treasury yield climbed from roughly 4.2% at the start of 2026 to around 4.7%, yet credit spreads showed few signs of stress and the Equal Weight S&P 500 remained close to record highs.
• Since January 2021, the S&P 500 delivered a 15.23% annualized return despite repeated concerns about valuations, AI speculation, market concentration and breadth.
• The 10-year Treasury yield approached 5% in 2023 after inflation had peaked, while the S&P 500 gained 26.26% that year, suggesting that rates alone may not end a bull market when fundamentals remain sound.
• The author sees AI-enhanced productivity, rising corporate efficiency and stronger earnings as long-term supports, while acknowledging that higher oil prices and rates could create short-term volatility.

Takeaway: Investors should focus more on earnings and credit conditions than on the $40 trillion debt headline; the author would become more concerned if earnings disappoint materially and credit spreads widen, although fiscal problems still require difficult policy choices.