Never Bet Against America

America turned 250 this month. At a gala dinner in Manhattan celebrating it, Treasury Secretary Scott Bessent was asked whether the new Fed chairman would cave to the White House on interest rates. His answer stuck with me: "The bond market has taken out more governments than howitzers."

The Treasury Secretary of the United States, admitting who is actually in charge. Not the president. The lenders.

But America is at unprecedented levels of debt and we've seen cracks begin to form in the bond market... is it time to bet against America?

The Sell America scorecard

2025 was the year the world tried to bet against America. At that same dinner, the talk turned to whether it worked. J.P. Morgan's Michael Cembalest framed it as three questions, and I agree with his answers. But I went and pulled the data myself.

Question: Are we at risk of the dollar losing its reserve currency status?

Cembalest's Answer: No. “Reserve currencies are hard to dislodge, particularly without a clear replacement,” he writes. “Other than an immediate selloff of ~10% when Trump took office, the trade-weighted dollar has been resilient. China as the world reserve currency is a frankly preposterous idea right now.”

I agree. The dollar is 57% of global reserves, and that share actually ticked up in Q1 2026. The supposed replacement, China's yuan, sits at 2%.

Question: Is the U.S. still attracting foreign capital?

Cembalest's Answer: Yes. “Foreign holdings of Treasuries are still rising….The same rising trend is seen when looking at foreign holdings of U.S. corporate bonds and U.S. equities.”

Again, I agree. Foreigners bought $184 billion of US assets in February alone, and total foreign holdings of Treasuries sit around $8.5 trillion. Countries that supposedly aren't happy with the US (we get it lol) keep lending us money. That is not what an exodus looks like. And, in my own experience, I see SO many flankers from all around the world. It's one of my favorite things about our community :)

Question: How has the “Sell America” trade worked out?

Cembalest's Answer: Not so well. “In March 2025, a flurry of Trump administration executive orders were catalysts for the first ‘Sell America’ episode since 1982.…Since then, the trade-weighted dollar is down just 1%; U.S. 10+ year Treasury yields are 10 basis points higher but 70 bps higher elsewhere in the developed world; and U.S. equities have outperformed.”

I agree, but 2025 was a myopic exception. International stocks beat the S&P 500 in 2025, 29% to 16%, the first time since 2022, and the dollar had its worst year in a decade. But if we zoom out... in the last 20 years the S&P returned 700% versus 233% for international stocks. Prices wobbled last year. The plumbing held. The money never left.

The exceptional thing nobody wants to talk about

So yes, America is still exceptional. But one other thing about us is exceptional too, and not in the good way.

The national debt just hit $39.4 trillion. It grew $2.8 trillion in the last year, about $7.7 billion a day, and crosses $40 trillion around October. The interest alone now runs $1.08 trillion a year. That is more than the entire defense budget. We spend more paying lenders than paying soldiers.

In 1981, the debt was $1 trillion. Ugh.

Final Thoughts

Buffett said it best: "Never bet against America." But people forget the second half of his thought from that same 2020 meeting. He also said you have to be careful how you bet.

That is exactly where I land. I own great American businesses - mainly because I live in the US and so my circle of competence is here. I'm certain there are great companies abroad, but I invest in what I know.

But, we do need to figure out our national debt. Fast.

Source: https://www.barrons.com/articles/stocks-today-indexes-slide-iran-war-fears-cb830acd