Treasury Yields Rise as Trump's "Big Beautiful Bill" Threatens to Balloon the Deficit

Enlightenment - A Herold & Lantern Investments Podcast

May 19, 2025 | Season 7 | Episode 18

Moody's downgrade of US Treasury debt from AAA to AA1 reverberated through markets, pushing bond yields higher and raising questions about America's fiscal trajectory. This watershed moment, following earlier downgrades by S&P (2011) and Fitch (2023), signals growing concern over the nation's $2 trillion annual deficit and proposed legislation that could add another $3.8 trillion through 2034.
The financial impact is immediate but nuanced. As 10-year Treasury yields approach 4.7% – what analysts identify as the tipping point where "equity returns start to waver" – investors face crucial portfolio decisions. Treasury bonds now more effectively compete with stocks for investment dollars, while gold surges $60 to $3,250 on geopolitical concerns. This evolving landscape demands thoughtful consideration of asset allocation between US investments, international stocks, and fixed income.
Looking deeper, today's immigration debates mirror historical patterns. The 1950s "Operation Wetback" deported approximately one million people during an economic downturn, highlighting how economic anxiety often drives immigration policy regardless of which party holds power. This historical perspective, championed by successful investors like Ray Dalio, helps contextualize current market conditions and policy decisions.
Tech investments continue making headlines, with NVIDIA announcing compatibility tools for competitors' products while Adobe presents a potential value play after falling 10% this year. Trading below 20 times forward earnings (compared to historical 30-40x multiples) with 90% gross margins and insider buying, Adobe maintains advantages in commercial AI applications despite increasing competition.
What does this mean for your portfolio? As Treasury yields rise and deficit concerns grow, it's time to reassess your investment strategy. Are you properly positioned for this new environment where fixed income offers more competitive returns? Should you increase international exposure or focus on dividend-paying stocks? Subscribe now and join us as we navigate these critical market shifts together.

** For informational and educational purposes only, not intended as investment advice. Views and opinions are subject to change without notice.
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Chapters

1. Market Overview and Moody's Downgrade (00:00:00)

2. Historical Immigration Policies and Parallels (00:08:27)

3. US Debt and the "Big Beautiful Bill" (00:14:29)

4. Rising Treasury Yields and Market Impact (00:22:44)

5. Key Market Updates and Adobe Analysis (00:26:49)

6. Closing Statements and Disclaimers (00:31:59)