JPMorgan chief executive Jamie Dimon is issuing a counterintuitive statement about the US national debt, arguing that it is serving as rocket fuel for the equity market.
The News
In a new Bloomberg interview, Dimon says a new and unusual macroeconomic picture is emerging where record global deficits, AI investments and rising capital demand are pushing bond yields higher without negatively impacting equities.
“The AI investments, in America alone, $450 billion last year, $750 billion this year, a trillion next year. Global deficits are at all-time highs and they are huge. So governments, including ours, have to borrow huge sums of money, more next year than this year. People who own bonds look at these things, and both inflation and demands for capital can push up rates.”
Looking closer at the country’s $39.049 trillion national debt, Dimon warns that the day of reckoning will eventually come but stops short of offering a concrete timeline.
“It is going to hit. US government debt is [$39 trillion]. The average rate is 3.5%. So even today, they can’t possibly refinance it at a lower rate than that. They have another $2 trillion to do this year. But the thing is, we don’t know when. We don’t know when the world gets too scared about that, when inflation makes it where people don’t want to own long-term duration securities, or when it’s just a demand for capital.”
For now, the JPMorgan chief executive says the record-level US government debt and AI investments are two sides of the same coin powering the stock market.
“There have been examples in history where there’s so much demand for capital, rates are going up, but it’s for a good reason. People are making productive investments in the world. All that spending drives corporate profits. So people shouldn’t be that surprised that corporate profits are doing quite well, which helps, obviously, the stock market.”
What It Means for Investors
Historically, investors often dump stocks to buy US Treasuries when yields surge, especially in times of geopolitical stress. When yields rise, bonds become more attractive than stocks because they offer bigger and safer returns.
Recently, Morgan Stanley CIO Mike Wilson warned that the stock market could witness a “meaningful correction” in the near term as the 30-year Treasury bond yield soared to 5.19% on Wednesday. If investors can get a 5% yield on a safer investment, many wouldn’t take the risk of holding or pouring money into equities that come with far greater uncertainty.
But Dimon appears to be saying that equities can continue rallying as yields on long-dated Treasuries rise, at least for the time being. Dimon argues that rates are rising because the US government is heavily borrowing to fund its programs, driving consumption and boosting corporate profits.
Data from the Treasury Department shows that for the 2026 fiscal year, the government has so far spent $957 billion on Social Security, $590 billion on Medicare and $583 billion on health. These are programs that ultimately stimulate the economy.
While Dimon notes that entitlement programs are not productive spending, he says AI investment is the other side of the coin that picks up the slack. Anthropic projects that AI will boost US productivity growth by 1.8% annually over the next 10 years, roughly twice the run rate in recent years. Meanwhile, McKinsey predicts that $6.7 trillion in investments will be needed to fund the global AI buildout through 2030.
The macroeconomic backdrop appears to favor long-term investors as the writing on the wall suggests that the US government will not stop borrowing anytime soon, and the AI CapEx cycle still has a long way to go. Looks like US equities are in the midst of a Goldilocks boom.
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