The next bull market in stocks won’t begin until the Federal Reserve cuts interest rates to bail out the US government, according to Bank of America.
The US government currently has a debt pile of $31 trillion, and that’s expected to soar by more than $20 trillion over the next 10 years. That’s $5.2 billion every single day, or $218 million every single hour, Bank of America’s Michael Hartnett said in a Friday note.
While the trillions of dollars of fiscal stimulus in the wake of the COVID-19 pandemic were successful in averting a recession over the past three years, that spending produced short-term gains that will eventually lead to long-term pain.
That’s because the US government’s rising debt pile and growing fiscal deficits will result in higher and higher interest payments as the Fed hikes rates, which influence the yields that must be paid on Treasury bonds.
For nearly two decades up until 2018, a combination of relatively small federal deficits and low interest rates meant that the US government was paying less than 1.5% of its GDP on payments tied to its debt. That figure has since jumped to 1.9%, and BofA hints that it will continue to rise.