The U.S. $40 trillion debt scare

Gargantuan, yes, but some perspective needed

$40 trillion!

The U.S. national debt crossed $40 trillion in August,¹ and right on cue, the scaremongering arrived. One television segment informed the viewers that if you earned $1 million every day, it’d take 109,589 years to accumulate $40 trillion. That math is correct. The perspective is lacking.

Whenever you hear statistics designed to shock, it’s worth asking what context might be missing. Consider what happened over roughly the same period that federal debt climbed from around $20 trillion to $40 trillion.² U.S. household net worth rose from approximately $80 trillion to about $174 trillion.³ In other words, American households gained nearly $95 trillion in wealth, more than twice the increase in federal debt.

Now, I understand the pushback. Rising household net worth doesn’t magically solve the debt issue. If you believe the debt problem requires solving, the solution will ultimately come from policymakers making difficult decisions about taxation, spending priorities, and the adjustments needed to strengthen programs such as Social Security and Medicare. Rebuilding trust funds and narrowing deficits are straightforward math problems. The challenge isn’t the arithmetic. It’s finding the political will to act.

Nor does a small intervention by the Treasury Department suddenly erase the issue.⁴ Treasury Secretary Scott Bessent’s actions don’t solve America’s fiscal challenges. What they may do, however, is remind investors that there’s a point at which policymakers will step in when market functioning becomes impaired. Investors may debate where that point lies, but history suggests it exists.

Bear narratives continue

Meanwhile, the bears continue searching for a narrative. Since the start of 2021, the S&P 500 has delivered strong returns⁵ despite repeated warnings about stretched valuations, an artificial intelligence (AI) bubble, excessive market concentration, and deteriorating breadth. When one concern failed to derail the market, another quickly emerged. Today, the focus has shifted to interest rates.

Certainly, rates are higher. The benchmark 10-year Treasury yield has climbed from roughly 4.2% at the start of the year to around 4.7% today.⁶ Yet markets generally appeared to have absorbed the move well. Credit markets have shown few signs of stress.⁷ The Equal Weight S&P 500 Index remains within striking distance of record highs.⁸ Most importantly, corporate earnings generally continued to surprise to the upside.⁹ Higher rates matter, but they matter within the context of economic growth and earnings.

Investors should also remember that this isn’t the first time we’ve traveled this road. The 10-year Treasury yield approached 5% in 2023¹⁰ after inflation had already peaked.¹¹ Markets seemed to digest that development and moved on.¹² The lesson wasn’t that rates don’t matter. It was that rates alone may not be enough to end a bull market when underlying fundamentals remain intact.

Personally, I’d be careful not to conflate near-term concerns with long-term trends. Elevated oil prices can create temporary challenges. Higher interest rates can create pockets of volatility. Both deserve monitoring. But neither automatically invalidates what I believe is a powerful long-term structural story centered on AI-enhanced productivity, rising corporate efficiency, and stronger earnings potential.

I’ll become more concerned if earnings begin to disappoint in a meaningful way and credit spreads begin to widen. Until then, earnings matter more to me than a $40 trillion debt burden or a 5.3% 30-year Treasury yield.¹³

Brian Levitt is Chief Global Market Strategist and Head of Strategy & Insights at Invesco.

Notes

1. Source: US Treasury, Aug. 20, 2026
2. Source: US Treasury, Aug. 20, 2026, based on total US debt outstanding over the past ten years.
3. Source: US Federal Reserve, March 2026
4. Source: Politico, “’Drop in the bucket’: Why Wall Street will shrug off Bessent’s bond market plans,” Aug. 19, 2026.
5. Source: Bloomberg, L.P., Aug. 19, 2026, based on the 15.23% annualized return of the S&P 500 Index since January 2021.
6. Source: Bloomberg, L.P., Aug. 19, 2026
7. Source: Bloomberg, L.P., Aug. 19, 2026, based on the option-adjusted spread of the Bloomberg US Corporate Bond Index.
8,. Source: Bloomberg, L.P., Aug. 19, 2026, based on the S&P 500 Equal Weight Index.
9. Source: Bloomberg, L.P., Aug. 19, 2026, based on the operating earnings of the companies in the S&P 500 Index.
10. Source: Bloomberg, L.P. The 10-year US Treasury rate began the year at 3.74% and peaked at 4.99% on October 19, 2023.
11. Source: US Bureau of Labor Statistics, based on the yearly percent change in the US Consumer Price Index, which peaked in June 2022.
12. Source: Bloomberg, L.P., Aug. 19, 2026, based on the 26.26% return of the S&P 500 Index in 2023.
13. Source: Bloomberg, L.P., Aug. 19, 2026, based on the 30-year US Treasury yield on Aug. 17, 2026.

Disclaimer

Contents copyright © 2026 by Invesco Ltd. Reprinted with permission.

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The opinions referenced above are those of the author as of August 21, 2026. These comments should not be construed as recommendations, but as an illustration of broader themes. This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

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