Wall Street's biggest bank says don't buy long bonds — as rich-world debt hits a record $75.8 trillion

Finance News 5 min 29 sources

Jamie Dimon won't touch long-term government bonds, and a ratings agency says developed-country debt will reach a record this year. Meanwhile chips lift the market, brokers bank a trading boom, and the yen falls to a four-decade low.

The warning from the corner office

Jamie Dimon runs JPMorgan, America’s biggest bank. This week he said something unusual: he would not buy long-term government bonds right now [1][2]. Those bonds — loans to the government that get paid back in ten, twenty, thirty years — are the classic safe place investors run to when stocks look shaky. Dimon is saying the safe place no longer feels safe [3].

He also warned that investors may be underestimating the risk in the stock market [1]. So both of the big places to put your money got a caution from the man who sees the flows through the world’s largest bank.

The backdrop makes his point land harder. Fitch, a firm that rates how likely borrowers are to repay, said government debt across the developed world will hit a record $75.8 trillion by the end of 2026 [4]. That’s rich countries collectively owing more than three times the size of the entire US economy. The cause is plain: governments keep spending more than they raise, and war, tariffs and higher costs keep the bills climbing [4].

Here’s why a long bond can hurt you. When you lend at a fixed rate for thirty years and inflation then runs hotter, your fixed payments buy less — and the bond’s resale price drops. A UBS strategist expects no rate cut from the Fed, America’s central bank, this month, and a hawkish tone given inflation [23]. One investor put it more bluntly: prices aren’t moderating, they’re going higher [24]. That is exactly the weather in which long bonds struggle.

For an ordinary person: if you hold a pension or retirement fund, part of it is almost certainly in government bonds — the “safe” slice. Dimon’s caution is a reminder that “safe” and “won’t lose money” are not the same word. Bond traders, for their part, have learned to tune out the daily political noise and watch the debt math instead [5].

The chips lead the market back up

Wall Street rose on Tuesday, carried by a recovery in semiconductor stocks [7]. The Dow gained 0.7%, the S&P 500 0.8%, and the tech-heavy Nasdaq 1.2% [7]. Barron’s called it the AI trade back “with a bang” [8]. SpaceX’s stock looked set to snap a brutal losing streak [9], and Super Micro jumped 15% on a new order [10].

Now comes the test. This is a heavy earnings week — the stretch when big companies report how much they actually made. Tesla is set for its biggest post-earnings share move in a year [12]. Alphabet, Google’s parent, reports under a cloud: a delay to a key AI model and questions about whether its enormous data-centre spending is paying off [13]. One shadow over the cheer: Washington imposed new 50% tariffs on Canadian imports on Tuesday [7], and Brent oil kept rising [28].

Where the money is quietly being made

Look past the headline stocks and a pattern shows up in this week’s results. Charles Schwab posted a record quarterly profit — driven not by clever bets but by a trading boom, as the US–Iran conflict pushed investors to reshuffle their portfolios [14]. Interactive Brokers, a rival platform, saw profit leap 35% on the same brisk activity [15].

The brokers don’t wager on whether stocks rise or fall. They take a small cut every time someone trades — so a nervous, busy market pays them either way. When everyone else is anxious, the toll-booth still collects.

The rest of earnings season was mixed. 3M lifted its profit forecast on a resilient industrial arm [17]. Halliburton, an oilfield-services firm, fell more than 6% after warning of weaker revenue ahead [18]. Capital One’s numbers were “good enough” but left the big question about the bank unanswered [16].

The yen keeps sliding

Japan’s currency hit 163.24 to the dollar on Tuesday — its weakest since late 1986, nearly a four-decade low [19]. Rising oil prices and higher US bond yields are lifting the dollar, and traders are watching for Tokyo to step in and defend the yen [19]. The euro briefly slipped just below $1.14 as the dollar gained across the board [19].

A weak currency is not simply “bad news.” It quietly moves money around inside a country. Japanese exporters earn more when their goods are cheap abroad — exports and imports both grew as the yen fell [20]. But anyone in Japan buying imported food or fuel pays more. Nobody voted for that trade; it happens through prices.

There’s a twist in Japan’s plans. It has pledged a $550 billion investment package in the United States — and JPMorgan and other US banks are lining up to help finance it [21]. Yet of the $100 billion in projects announced so far, financing has been settled on just $2.2 billion [21]. One Reuters columnist judged the growth pitch “all hype and no substance” [22].

A quiet word to the hedge funds

Away from the tape, the US Treasury delivered a warning that will matter more over time than any single day’s move. At an industry gathering in New York on Tuesday, officials flagged several high-profile tax strategies sold by Wall Street as “potentially abusive” [27]. These are the kind of thing that looks, in the department’s words, “too good to be true” [27]. The tactics, known as “tax alpha,” are designed to shave investors’ tax bills [26]. The message: the government is watching, and some of these trades may not survive the scrutiny.

It’s a small headline today. But rules that get written after a warning like this can quietly reshape how the wealthiest money is managed for years.

02 · Lesson · why it matters

The safe pile that quietly lends the most to whoever owes the most

A stock fund fills with the winners; a bond fund fills with the biggest borrowers — so "buy the market" backs the wrong thing.

The safe place stopped feeling safe

The head of America’s biggest bank said he won’t buy long-term government bonds. That is a strange thing to hear. Those bonds are meant to be the calm harbour — the place your money hides when stocks look wild.

At the same time, a ratings firm says rich-world governments will owe a record amount this year. More debt, and the safe harbour looking less safe. The two facts are the same story, seen from two ends.

To understand why, you have to look at how “safe” money is usually held. Most people never pick individual bonds. They own a fund that holds thousands at once. And the rule that fund follows is quietly doing something odd.

Two funds, two opposite rules

Start with a stock fund — the kind millions own without thinking. It holds a slice of the whole market. The bigger a company is worth, the bigger its slice. Own the fund, and you own the most of whatever the market judges most valuable. The reward flows to worth.

Now a bond fund. It also holds thousands of loans at once. But a bond is not worth something the way a company is. A bond is a debt. So the fund can’t weight by value the same way. It weights by how much has been borrowed.

Read that again. The more a government owes, the bigger its slice of the fund. The rule is not “back the strongest.” It is “back the biggest borrower.”

The reward for owing more

Picture two governments. One has been careful and borrowed little. One has spent freely and borrowed twice as much. In a standard bond fund, the free spender gets twice the space. Twice your money.

This is the opposite of how you’d lend as a person. If a friend already owed money everywhere, you’d lend them less, not more. The fund does the reverse — automatically, by design. Borrow more, and you are handed a bigger claim on every passive saver’s cash.

No one decided to reward the spender. The rule just runs. And when the whole world’s governments are borrowing at record levels, that rule quietly steers the “safe” money toward exactly the debts growing fastest.

You are already in the room

This is not a problem for traders somewhere else. If you have a pension or a retirement account, part of it is almost certainly in a bond fund. That is the slice everyone calls “safe.”

Which means you are already the lender. Through that fund, your money is out on loan to governments — and most of it to the ones that owe the most. You never chose which. The rule chose for you, the day you bought the fund.

The banker’s caution and your quiet pension slice are the same thread. He is stepping back from long government debt. You, through the fund, are stepping further in — without a decision ever crossing your desk.

The rule that poses as plain fact

“Just buy the market” sounds like neutral good sense. Don’t gamble, don’t pick, own the whole thing. For stocks, it mostly works. The trouble is that people carry the phrase across to bonds, where “the whole thing” means something different.

Weighting a fund by amount owed is not a law of nature. It is a design choice — one that made sense when governments borrowed modestly and repaid reliably. It still poses as the obvious, neutral way to hold bonds. But a choice made in a calmer era is now steering money in a debt-heavy one.

That is the shape under the surface. What looks like simply “owning the market” is really a rule about who gets your money — written by someone, for a world that has since changed.

What no single seat can see

The saver sees a line on a statement marked “bonds — low risk.” The fund sees a rule to follow. The government sees a buyer for its debt. Each is doing the sensible thing from where they sit. None of them is looking at the whole.

The whole is this: a quiet river of “safe” money flowing toward the deepest borrowers, growing wider as the borrowing grows. Almost no one, at any point, chooses it on purpose. Seeing that doesn’t tell you what to do with your own savings. It tells you that “safe” is a word with machinery behind it — and that the machinery, like most machinery, was built for a world that has already moved on.

03 · Lab · your turn

Where Your Safe Money Goes

Choose the rule your bond fund follows, then watch a reckless borrower pull your "safe" savings toward it.

04 · Hope · carry this

The rules that quietly steer our savings were written by people, for a world that has since changed — which means people can see them plainly and write better ones. Daylight on the machinery is where every repair begins.