Renowned investor Ray Dalio has issued a stark warning that the United States is on a trajectory toward a 'debt death spiral,' driven by unsustainable fiscal deficits and rising interest expenses. Investors are reassessing the safety of assets across equities, bonds, and currencies as macroeconomic risks intensify.
- U.S. federal debt exceeds $34 trillion, with interest payments projected to surpass $1 trillion annually by 2026.
- 10-year Treasury yield (US10Y) rose to 4.8%, signaling increased risk premiums.
- TLT ETF saw $1.2 billion in net outflows in November 2025.
- Apple (AAPL) and Alphabet (GOOGL) declined 7% and 5.5% respectively since early November.
- S&P 500 (SPX) trading near 5,200 amid heightened volatility.
- DXY shows signs of weakening, reflecting growing skepticism over long-term dollar strength.
Ray Dalio, founder of Bridgewater Associates, has raised alarm over the long-term sustainability of U.S. fiscal policy, warning that the country is approaching a dangerous inflection point where rising debt burdens could trigger a self-reinforcing cycle of higher interest rates and increased borrowing. He cited federal debt levels surpassing $34 trillion and projected interest payments on that debt to exceed $1 trillion annually by 2026, consuming nearly 20% of federal tax revenue. This fiscal strain, Dalio argues, threatens to erode confidence in the dollar and undermine the nation's economic foundation. The implications are already visible in financial markets. The 10-year U.S. Treasury yield (US10Y) has climbed above 4.8%, reflecting heightened risk premiums. Meanwhile, the U.S. Dollar Index (DXY) has weakened slightly over the past quarter, signaling growing skepticism about long-term dollar strength. In the bond market, the iShares 20+ Year Treasury Bond ETF (TLT) has seen significant outflows, with net redemptions totaling $1.2 billion in November 2025 alone, as investors seek safer havens or shorter-duration instruments. Equity markets are also feeling the pressure. Large-cap technology stocks, including Apple (AAPL) and Alphabet (GOOGL), have experienced downward pressure since early November, with AAPL’s market cap declining by approximately 7% and GOOGL’s by 5.5% amid concerns over higher discount rates reducing future cash flow valuations. The S&P 500 (SPX) has hovered near 5,200, showing increased volatility as investors weigh the long-term impact of fiscal instability on corporate earnings. Financial institutions and fixed-income investors are now recalibrating portfolios to account for the risk of prolonged high rates and potential credit downgrades. The scenario underscores a broader shift in market sentiment, where the perception of U.S. fiscal resilience is being challenged by structural debt dynamics.