U.S. debt heads toward $40T—and markets are betting on stocks; Hormuz risk and Russia’s liquidity squeeze move in parallel

U.S. national debt is approaching a $40 trillion milestone, with Bank of America’s chief equity strategist Michael Hartnett warning it could be reached by 2029 and that $50 trillion may arrive soon after. In parallel, U.S. stock futures rose as strong earnings and benign macro data helped push equities toward ending the week at all-time highs. The market narrative is shifting from duration risk to earnings momentum, with investors showing a preference for stocks over bonds as the fiscal backdrop worsens. Together, these pieces frame a high-liquidity, risk-on posture that is being tested by the long-run arithmetic of sovereign debt. Strategically, the U.S. debt trajectory matters because it shapes the future path of Treasury supply, term premia, and the political economy of fiscal adjustment, even when near-term growth looks resilient. The immediate beneficiaries are equity risk premia and sectors tied to earnings strength, while the potential losers are bondholders exposed to higher yields and investors who rely on stable real rates. At the same time, oil traders are repricing Hormuz risk as demand expectations deteriorate, rebuilding a “Hormuz premium” after last week’s deal optimism faded. This creates a cross-asset tension: equities can rally on earnings while energy risk and macro uncertainty rise, complicating the policy trade-offs for central banks and governments. On the energy side, September WTI futures were quoted around $81.19 late Thursday, up about $4.11 or 5.33% for the week, signaling a meaningful repricing of geopolitical supply-risk even without a confirmed escalation event in the articles. In shipping, the Baltic Dry Index climbed to 2,863 (up 19 points), a modest but notable read-through for trade volumes of coal, grain, and iron ore. For Russia, the liquidity picture is tightening: a structural liquidity deficit in banks rose from 2.57 trillion rubles to 2.7 trillion rubles as of August 13, implying banks owe more to the Central Bank than they place on correspondent accounts and deposits. Meanwhile, investors increased contributions to Individual Investment Accounts (IIS) to 73 billion rubles in Q2, up 13% quarter-on-quarter, indicating continued retail appetite even as system liquidity becomes more constrained. What to watch next is whether the U.S. equity rally can withstand any renewed bond-market stress as debt milestones approach, and whether investors keep rotating toward stocks rather than extending duration. For energy, the key trigger is whether Hormuz-related risk premia keep expanding or mean-revert as demand data and any diplomatic signals evolve; watch WTI front-month spreads and the size of the “Hormuz premium” in pricing. For Russia, monitor the Central Bank’s liquidity operations and whether the structural deficit continues widening, alongside IIS flows that could either cushion risk appetite or amplify volatility if funding conditions tighten further. In the near term, the timeline implied by Hartnett’s debt milestones (toward $40T by 2029 and $50T soon after) makes the next few quarters a test of whether current risk-on positioning is sustainable or merely postpones the adjustment.

Geopolitical Implications

• 01

  A widening U.S. fiscal path can raise global term premia and complicate risk management for investors, even when equities look strong in the short run.

• 02

  Repricing of Hormuz risk links Middle East security perceptions to global energy inflation expectations and to central-bank policy trade-offs.

• 03

  Russia’s liquidity squeeze and continued retail inflows highlight internal financial balancing acts that can affect capital allocation and market stability.

Key Signals

• —U.S. Treasury yield curve moves and credit spreads as debt milestones approach; watch for renewed duration selloffs.
• —WTI front-month spreads and the persistence of the Hormuz premium versus demand-driven mean reversion.
• —Bank of Russia liquidity operations: whether the structural liquidity deficit continues to widen or stabilizes.
• —IIS net inflows and any shift in retail risk appetite as funding conditions tighten.