As we enter a pivotal election season, volatility in the U.S. stock and bond markets has notably increased. In October, the S&P 500 index dropped by just under 1 percent, interest rates generally rose, gold reached a new record high, and oil prices have bounced up and down depending on news out of the Middle East.
In the bond market, the yield on the 10-year U.S. Treasury dropped to 3.63 percent following a recent interest rate cut by the Federal Reserve on September 16, 2024. However, by November 1, 2024, this yield climbed to 4.37 percent, marking a 0.74 percent increase. This upward trend reflects market concerns about the significant rise in government debt and uncertainty surrounding the fiscal policies of the next administration.
U.S. federal debt as a percentage of Gross Domestic Product (GDP) now stands at over 120 percent, down from the COVID-era peak of 132 percent but still nearly double the level before the 2008 financial crisis. The annual interest expense on the roughly $36 trillion federal debt has risen to over $1.1 trillion – almost double the pre-COVID level and approaching 25 percent of annual tax receipts. In fact, this interest expense now surpasses every budget line item except Social Security.
TJT Capital Group’s InVEST Risk Model ® has helped our clients participate in bull markets and protect capital from the devastation of bear markets by focusing on 5 indicators that really matter when it comes to determining the health and direction of markets. The following is the most recent update.