BlackRock's strategists anticipate ongoing market volatility, attributing it to sustained high interest rates aggravating the US's considerable debt burden. Despite some investors expecting rate cuts, the note highlights that interest rates are likely to stay elevated due to the Federal Reserve's aggressive rate hikes, slowing US growth and necessitating higher rates to manage inflation.
Their warning extends to the potential breaking point for the US debt situation, with the national debt nearing $34 trillion. Annual interest expenses on this debt, surpassing $1 trillion in the last quarter, could soon exceed Medicare funding if rates hover around 5%. Concerns over US debt have already contributed to market fluctuations, notably evidenced by the Cboe Volatility Index breaching 20 in October and the 10-year US Treasury yield briefly surpassing 5% last month.