Rebecca Patterson, formerly of Bessemer Trust and now a senior fellow at the Council on Foreign Relations, expressed concerns about the U.S. bond market, noting its increasing volatility, which she likened to that of a developing market. She recommends investors prioritize cash or short-term fixed income over long-term bonds, citing an op-ed she wrote last January forecasting increased deficits, growth, and inflation. Patterson highlighted that the current volatility is exacerbated by recent actions from the Treasury Department.
The U.S. national debt recently surpassed $40 trillion, a significant increase of a third in less than five years. Patterson pointed out that the U.S. debt-to-GDP ratio is around 100% and is projected to reach 120% within the next decade. She questioned who would buy these bonds and at what yield, contributing to market uncertainty. While the U.S. dollar is currently strong, she warned that a weaker dollar could lead to higher inflation, potentially prompting the Federal Reserve to raise interest rates.
Patterson stressed that "something has to give" regarding U.S. fiscal policy. She noted that since 2008, Americans and politicians have become accustomed to government intervention during crises, making fiscal austerity politically unpopular. She believes this dynamic has led both political parties to continually increase deficits, driving up the national debt. She urged politicians to be transparent with voters about the need for fiscal adjustments.
