Chris Wood flags 5% yield risk for markets

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Key points

• Top Trending Stocks: SBI Share Cost, Axis Bank Share Rate, HDFC Bank Share Cost, Infosys Share Rate, Wipro Share Cost, NTPC Share Rate.
• US total public debt rose 7.8% from a year earlier to $40.05 trillion as of August 18, Treasury data cited by Wood indicated.
• The positive for equities, according to Wood, is that Treasury Secretary Scott Bessent appears focused on stopping the 10-year yield from reaching 5%, let alone breaking above it.
• US debt tops $40 trillion: Chris Wood flags the 5% trigger that could rattle stock market.
• Wood identified a move above 5% in the 10-year US Treasury yield as the "obvious trigger point" for near-term equity risk.

US debt tops $40 trillion: Chris Wood flags the 5% trigger that could rattle stock market. ETMarkets.comLast Updated: Aug 21, 2026, 10: 37: 00 AM IST.

US public debt has crossed $40 trillion as its fiscal position worsens and Treasury yields move closer to levels that could threaten equities. Jefferies strategist Christopher Wood flagged a rise above 5% in the 10-year US Treasury yield as a key risk trigger, with the yield lately at 4.69%.

Notably, the US debt pile has crossed $40 trillion just as its fiscal position deteriorates and bond yields edge towards a level that could shake equity markets, according to Jefferies strategist Christopher Wood. Wood identified a move above 5% in the 10-year US Treasury yield as the "obvious trigger point" for near-term equity risk. The yield stood at 4.69% after touching 4.746% on Tuesday, leaving markets uncomfortably close to that threshold.

US total public debt rose 7.8% from a year earlier to $40.05 trillion as of August 18, Treasury data cited by Wood indicated. The milestone comes alongside a widening fiscal deficit and growing pressure on long-term borrowing costs. "The fiscal deterioration is clearly one of the forces putting upward pressure on long-term Treasury bond yields, " Wood wrote in the latest edition of Jefferies' GREED & fear report. The US fiscal deficit widened to $432 billion in July, its highest monthly level since March 2021 and a record for the month. Meanwhile, the cumulative deficit for the first 10 months of the fiscal year reached $1.799 trillion, already exceeding the $1.775 trillion recorded for the whole of fiscal 2025. Live Events.

While the annualised fiscal deficit climbed to 6.1% of gross domestic product in July from 5.7% in the 12 months through June, the 10-month deficit was additionally the highest in five years. Tariff Boost Fades.

Meanwhile, the deterioration partly reflects the fading contribution from tariffs. The monthly tariff figure was a negative $8.5 billion in July after a negative $25.56 billion in June, compared with a positive $22.12 billion in April and a record $31.35 billion in October 2025. Total federal receipts fell 1.3% year-on-year in July and declined 5.7% over the past three months. Tax receipts, including tariffs, dropped 8% in July and 6.4% over the three-month period since of tariff refunds. Spending moved sharply in the opposite direction. Total administration outlays jumped 21.7% from a year earlier in July and climbed 10.7% over the past three months. National defence expenditure rose 19.9% in July and 10.9% over the three-month period. Another source of pressure is the gap between US economic expansion in nominal terms and Treasury yields. Nominal GDP has expanded at an average year-on-year rate of 5.9% over the past 12 quarters, remaining above the 10-year bond yield-a divergence Wood sees as a signal that yields should move higher. Bessent Tries To Defend the 5% Line.

Meanwhile, the positive for equities, according to Wood, is that Treasury Secretary Scott Bessent appears focused on stopping the 10-year yield from reaching 5%, let alone breaking above it. The US Treasury remarked it would at least double the amount of longer-term bonds it buys back. After that announcement, 10-year and 30-year Treasury yields declined to as low as 4.63% and 5.18%, respectively. Still, the bond market backdrop remains fragile. Long-dated US Treasuries have been in what Wood called a "brutal bear market" since March 2020. The Bloomberg US Long Treasury total-return index has fallen 39% over that period, translating into an annualised decline of 7.3%. Since its March 2020 low, the S&P 500, by contrast, has advanced 279%, or an annualised 23.1% on a total-return basis. Foreign Capital Adds Another Fault Line.

In practice, the US additionally remains heavily dependent on foreign capital. Its net international investment position deficit widened from $7.8 trillion, or 39.9% of GDP, at the end of 2017 to a record $22.1 trillion, or 75.5% of GDP, at the end of 2024. It stood at $21.3 trillion, equivalent to 68.1% of GDP, at the end of the March 2026 quarter. Foreign portfolio holdings of US equities climbed 24.5% year-on-year to a record $24.5 trillion at the end of June. Annualised foreign net purchases surged to a record $919 billion in the 12 months through June as the artificial-intelligence boom intensified. While the AI trade has continued to deliver solid returns, particularly for businesses supplying the industry's essential infrastructure, those foreign holdings additionally represent a potential source of selling if yields break higher and undermine equity valuations. Japan is another pressure point. Japanese investors held $1.12 trillion of US Treasuries at the end of June, down from a recent high of $1.24 trillion in February. Wood expects pressure on Japanese institutions to sell long-term Treasuries to intensify as domestic bond yields rise and the Bank of Japan faces calls to tighten monetary policy. Against that backdrop, Wood remains bullish on hard-asset hedges. He remarked investors should own oil and energy stocks as the best hedge against the disruption surrounding the Strait of Hormuz, with gold the second-best option. Wood is additionally increasing an already high exposure to gold miners throughout his model portfolios, citing their improving free-cash-flow generation relative to the deteriorating trend for the S&P 500.

US debtUS debt pileChris WoodJefferies strategist Christopher WoodUS total public debtstock market outlookindian stock market.

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For now, chris Wood flags 5% yield risk for markets remains the part of the story worth watching, and further updates are likely as more details are confirmed.