Warning Signs Are Flashing for the Economy

Something significant is happening in the bond market.

Government borrowing costs are surging around the world, with bond yields in several major economies reaching levels not seen in decades.

In the U.S., the 10-year Treasury yield just climbed to a 20-month high, while the 30-year yield recently reached its highest level since 2007. Similar warning signs are appearing overseas, with long-term yields in Japan and the U.K. reaching levels not seen since the 1990s.

And the pressure is building:

• The national debt just surpassed $40 trillion for the first time in history.
• The U.S. deficit remains near $2 trillion annually.
• Inflation remains above the Federal Reserve’s 2% target.
• Conflict overseas is pushing energy prices higher.
• Heavy borrowing tied to the AI boom is adding further pressure to credit markets.

Why this matters:

When Treasury yields rise, the effects spread across our financial system. Borrowing becomes more expensive, and stocks suddenly don’t look so hot compared to higher-yielding bonds. With stock valuations already dangerously high and economic growth showing signs of strain, a major stock sell-off could signal the next big recession.

No one knows exactly when that next major market drop will arrive. But waiting for stocks to fall before diversifying means reacting to a downturn instead of preparing for one.