The U.S. debt crisis is rapidly escalating, with national debt surpassing $37 trillion in mid-2025, marking a 520% increase in just 25 years. Annual deficits have reached $1.36 trillion for FY2025 and are projected to rise to $2.7 trillion by 2035. Interest payments now exceed defense spending, reaching $1.11 trillion annually. With $9.2 trillion of debt due to mature in 2025, the government faces a death spiral of insolvency without aggressive reforms. The Federal Reserve may need to step in as a perpetual buyer of Treasuries, as foreign demand wanes and debt levels continue to surge.

Despite short-term tailwinds like tax cuts and capital expensing, sustained economic growth of over 3% is unlikely due to a shrinking labor force, declining productivity, and rising inflation. Corporate profits are declining, and consumer credit defaults are on the rise. The Federal Reserve and foreign central banks are retreating as buyers of last resort for Treasury issuances, leaving a widening buyer vacuum. The bond crisis is real, with triggers including rising deficits and inflation, posing a threat to housing, credit, and equity markets.

As the debt death spiral looms, investors may need to rethink traditional portfolio models and consider owning short-term Treasuries while actively trading equities based on inflation and growth indicators. The economy may have limited upside potential in specific sectors like defense, technology, and precious metals. With complacency among investors at a high, staying alert and adaptable is crucial in navigating the impending asset price reconciliation.

Read more at Investing.com: US Debt Spiral Accelerates: Are We Nearing the Point of No Return?