Capital Market Outlook

Summary

• Total U.S. government debt surpassed $40 trillion in August 2026, having more than doubled in less than a decade.
• Debt held by the public stands at roughly $32 trillion, or approximately 100% of GDP.
• The U.S. budget deficit ran at 6% of GDP in the first 10 months of the fiscal year.
• Interest payments on U.S. debt neared $1.2 trillion in the first 10 months of the fiscal year, a 15% year-over-year increase.
• U.S. consumer liabilities as a share of assets reached their lowest level since 1963.
• Corporate balance sheets remain healthy with debt locked in at low rates during the pandemic era.
• A joint U.S.-Japan foreign exchange intervention occurred to stop the yen's slide.
• The yen is currently valued at roughly 160 yen per dollar, implying it is about 25% undervalued compared to a fair value of 120 yen per dollar.
• Japan's new policy phase includes higher Bank of Japan policy rates, a shrinking primary fiscal deficit projected to turn into a surplus by 2027 or 2028, and continued corporate governance reforms.
• The Northern Sea Route in the Arctic Ocean serves as an alternative shipping lane between Europe and Asia that is over 8,000 kilometers shorter than the Suez Canal route.
• China's Sea Legend Shipping launched its first regular container service via the Northern Sea Route in August 2026.
• Cargo volume through the Northern Sea Route reached a record 38 million tonnes in 2024, a near-tenfold increase from a decade earlier.
• Russia operates 57 icebreaker ships, more than the rest of the world combined.
• The Arctic holds an estimated 13% of untapped global oil reserves and 30% of untapped global natural gas reserves.
• The Iran-U.S. war has caused the loss of close to 75% of oil and over 90% of liquefied natural gas that previously passed through the Persian Gulf.
• The DJIA closed at 53,277.01 with a year-to-date return of 12.0%.
• The S&P 500 closed at 7,674.37 with a year-to-date return of 12.9%.
• The MSCI Emerging Markets index closed at 1,721.89 with a year-to-date return of 24.2%.
• The 10-year U.S. Treasury yield stood at 4.73% as of August 21, 2026.
• Real U.S. GDP growth was 1.5% in Q2 2026 and is forecast at 2.1% for the full year 2026.
• CPI inflation was 3.8% in Q2 2026 and is forecast at 3.2% for the full year 2026.
• The Fed funds rate was 3.63% at the end of Q2 2026 and is forecast to reach 4.38% by the end of 2026.