Animal Spirits Podcast

Talk Your Book: The Bubble Will Get Bigger

13 snips
Nov 17, 2025
Guest
Michael Arone
Michael Arone, Chief Investment Strategist at State Street Investment Management, shares his insights on macroeconomic trends. He discusses how persistent government deficits and monetary policy have become tailwinds for risk assets. Arone delves into the implications of rising government debt on long-term rates and the reasons behind the recent drop in yields. The conversation covers the potential risks and rewards of the AI boom, market concentration, and the historic cycles of bubbles, leaving listeners with a cautiously optimistic outlook on investing.
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INSIGHT

Monetary And Fiscal Tailwinds Boost Stocks

  • Easy monetary policy plus permanent fiscal deficits act as a sustained tailwind for risk assets.
  • Michael Arone warns this combo can repeat and extend bull markets despite higher deficits.
INSIGHT

Fed Runoff's Impact Was Muted

  • Fed balance sheet runoff mattered less because private fiscal stimulus and locked-in lower long-term rates offset it.
  • Arone says Fed signaled end to quantitative tightening as reserves moved from abundant to ample.
INSIGHT

Rising Sovereign Supply Raises Yield Risk

  • A global increase in sovereign issuance can push long-term yields higher and raises the discount rate for assets.
  • Arone flags higher long-term rates as a real risk that would hurt asset valuations.
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