Monday, September 14, 2026
The federal government’s share of the economy is the largest it’s been in 75 years.
So far in the 2020s, federal spending has averaged 26% of gross domestic product, which is the value of everything the country produces in one year. That’s greater than any other decade since World War II.
Of course, the debt tracks the spending. The U.S. owes over $40 trillion today, up from roughly $19.5 trillion just 10 years ago. The debt has doubled every 10 years under all presidential administrations for many decades.
At this pace, federal debt is on track to hit $80 trillion by 2036. That seems unfathomable.
While hard to believe, there’s a nasty piggyback on that one. It’s that the stock market is achieving valuations never seen before.
A Bloomberg composite of eight valuation metrics now sits near the 100th percentile of its 125-year history, above both 1929 and the 2000 dot-com peak. Of course, this is happening at the exact moment that cash flows justifying these valuations are vanishing.
For instance, Google parent company Alphabet just posted its first negative free cash flow quarter since its 2004 initial public offering. Also, Amazon’s trailing 12-month free cash flow swung to -$8.2 billion.
Paying all-time high multiples for shrinking cash flows typically doesn’t end well.
To summarize, we have monumental debt and sky-high valuations for shrinking cash flows. These are the elephants in the room.
Daniel A. White is an investment advisory representative of and provides advisory services through CoreCap Advisors, LLC. Daniel A. White & Associates and CoreCap Advisors are separate and unaffiliated entities.