Democrats are riding a wave of discontent with President Trump, the Iran war he started in February, and a host of Trump actions that many voters don’t support. Trump’s approval rating is historically low, which normally augurs big gains for the opposition party in midterm elections.

Democrats seem likely to take control of the House of Representatives, which only requires a net gain of four seats. Forecasts for Democratic gains range from 10 to 20 seats, and possibly more if it’s a legitimate “blue wave.”

Not long ago, the Senate seemed to be a Republican fortress, due mainly to seats Democrats would have to flip in Trumpy states. At the start of the year, the odds of Democrats taking the Senate were just 30%, according to Kalshi.

The odds of Democrats taking the Senate have now soared to 66%. That’s because Democrats now seem likely to flip seats in North Carolina and Alaska, with polls showing them even or better in Maine, Ohio, Iowa, Kansas, and Texas. If Democrats can grab those two flips plus an additional two seats on net, they’ll win the Senate.

Control of one or both houses of Congress will give Democrats newfound power to investigate Trump administration activities and shape some legislation. But a lot could happen before the next Congress convenes next year. Here are 7 things to watch between Election Day and the end of 2026:

Trump election interference. Trump and his acolytes have already tried to manipulate state voter rolls and restrict mail-in voting. Immigration agents are hunting for noncitizen voters, who barely exist. Courts have blocked most of these efforts, but there could still be more to come. Trump could send federal agents to intimidate voters at polling places or seize ballots. Once the voting is over, there’s a good chance Trump will claim election fraud and try to overturn key losses. It’s a good bet Trump will stress the system somehow. Here’s a sensible guide to what might happen and what ordinary people can do about it.

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Inflation is heating up, as anybody who fills a gas tank knows. Most people pay attention to the overall inflation rate, which jumped from 3.4% in August to 3.7% in September. But the wholesale inflation rate is important too, because a jump in producer prices usually companies dealing with higher costs will pass some of that onto consumers through future price hikes. And wholesale inflation jumped from 5.6% in August to 6.3% in September. That suggests consumer inflation could worsen.

The biggest source of inflation is no surprise: energy and things related to energy.

Oil prices have been surging as the Iran war drags on. The current price of Brent crude is close to $110 per barrel, the highest since May.

Gasoline and diesel prices dipped during the last couple of weeks, but they will probably follow oil prices back up. President Trump’s supposed deal to acquire some diesel products from Russia hasn’t had any noticeable impact on diesel prices. Russia has internal fuel shortages of its own and may not have any diesel to spare. Trump’s deal has also generated intense controversy and he may simply drop it.

Soaring interest rates have been a big factor in financial markets this year. Rates have now stabilized and might stay around current levels for a while. Mortgage rates lag the benchmark 10-year Treasury by a couple of weeks, and those rates will probably come down a bit, just as the 10-year yield has.

Stocks hit record highs on October 6, but have since hit the skids. A lot of the financial news sites focus on daily or weekly changes in the market. We prefer a longer-term view because stocks can be volatile. Unless you’re speculating or trying to time the market, longer-term performance is what matters. Here’s how the S&P 500, Nasdaq 100 and Russell 2000 indexes have performed this year:

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Instead, Trump is mostly trying to change the subject and hoping voters don’t notice that inflation is once again eroding paychecks and making life difficult. Many voters, however, can’t help but notice.

Inflation jumped from 3.4% in August to 3.7% in September. At the start of 2026, it looked like inflation might get back to normal this year. But now it’s causing problems ranging from higher interest rates to strained household budgets.

We’ll use some charts to tell the story.

Wage growth is just 3%, so with inflation at 3.7%, real income growth, adjusted for inflation, is negative. Inflation has exceeded wage growth for most of 2026, which means the average paycheck buys less and the typical worker is falling behind. For the incumbent political party, that’s a formula for electoral disaster.

Everybody knows about surging energy prices, triggered by the Iran war Trump started in February and Iran’s ongoing disruption of Persian Gulf energy exports. Trump said recently that he made a deal with Russia to bring more diesel fuel onto the market, an obvious effort to lower prices. It hasn’t worked and may even backfire. Trump is now facing mounting opposition from within his own party for going soft on Russia and helping it earn more revenue to finance its brutal war with Ukraine.

Rising inflation is showing up now as higher costs for energy and things related to energy, such as airfares and other types of transportation. But those sky-high diesel prices will likely cause higher future prices for harvested food, transported goods, and other things dependent on diesel. Grocery inflation has tapered off to a mere 1.8%, but food inflation might be heading back up.

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But economists have several worries. Rising interest rates could derail a bull-market in stocks that just entered its fifth year. The artificial-intelligence boom could falter, eliminating the main driver of that remarkable rally. And some Americans are spending down their savings, a worrisome sign of financial stress at many households.

Three charts tell the story.

1. Rising rates. The biggest news in financial markets this year is soaring interest rates, which are heading back toward historic norms after nearly 20 years of unusually cheap money.

Several factors are pushing rates higher. The Iran war energy crisis has caused inflation that will be a problem until the Islamic theocracy stops disrupting Persian Gulf energy supplies. Governments and businesses are issuing huge amounts of debt, forcing them to offer higher rates to entice buyers. Relatively strong growth can also push rates up, especially in concert with those other factors.

[5 ways to fix capitalism]

Rising rates haven’t yet caused widespread problems, even as the press worries that bonds will “blow up.” It doesn’t quite work like that. Higher interest rates provide a higher return for investors, who now have a stronger incentive to buy bonds. Stronger demand could bring rates down slightly. Economist Ed Yardeni of Yardeni Research says the benchmark 10-year Treasury yield—which has jumped from 4% to as high as 5.3% since the Iran war started in February—is “back to normal” and will settle between 4% and 5%. That would be a drop from current levels, which means rates on mortgages and other loans would decline as well.

2. Extreme stock-market concentration. Higher rates can ding stocks, because investors buying bonds to cash in on rising returns might sell stocks to do so. The stock market has held up, however, with the S&P 500 hitting a new record high on October 6. It’s just a hair below that now.

[Only stock owners are better off under Trump]

Analysts see another problem, however. The S&P 500 is up a healthy 14% this year, but that is driven almost entirely by the AI boom, with an assist by the energy sector, benefiting from the Iran war and higher prices. The rest of the market is meh.

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But it’s worth looking at a few charts to see what’s going on, because the French situation could be a preview of what the United States faces in a year or two or three. Surging interest rates are making France’s public debt load unsustainable, which could ultimately force cuts in cherished government benefits. Voters are angry, while politicians seem shell-shocked and paralyzed.

In other words, it looks like America c. 2029.

Interest rates have been rising everywhere, for a number of reasons. One is the inflation surge caused by the Iran war and the energy crisis it triggered. Another is the sheer amount of debt coming onto the market from governments and businesses, especially those borrowing money to finance the artificial intelligence buildout.

Yields on French debt, however, have risen by more than similar types of debt. Here’s the yield on the 10-year notes issued by the US and French governments:

Since July 1, the yield on the benchmark 10-year US Treasury note has jumped by 80 basis points, or eight-tenths of a percentage point. That’s a big increase in a short period of time, and it has rattled financial markets.

[It’s time to revise the American Dream]

The French 10-year note, known as the OAT (obligation assimilable du Trésor), has jumped by 131 basis points. The message is that markets think France is in trouble, which is why rates there are surging more than elsewhere. The cost of insuring French debt against default has nearly doubled in recent weeks.

Part of the problem in France is mushrooming government debt, paired with worries that the government might not be able to pay it off. Here’s the public debt load in France, compared with the United States:

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The next-best alternative seems to be socialism, which has never succeeded anywhere yet seems to be the unknown outsider Americans are willing to take a chance on. Approval ratings for socialism have grown to 43% in Gallup polling, the highest level in surveys that date to 2010. Capitalism does better, at 55% approval, but its reputation is fading—and this shouldn’t even be close.

The problem with capitalism isn’t the system itself. The problem is the way we manage it. There are many forms of capitalism, depending on what societies want from it. The Nordic nations use capitalism to provide widespread social benefits, and they’re willing to pay high taxes to enjoy those benefits. American capitalism is flintier. As an individualist nation from birth, we’re more willing to let people fend for themselves. But we have amended laissez-faire capitalism many times, and can do it again.

Here are 5 ways to reform capitalism so that it brings prosperity to more people and ends the fever dream that socialism is somehow better:

1. Protect the golden goose. The American capitalist system generates phenomenal amounts of wealth. More wealth is good. Less wealth is bad. We have a distribution problem, because too much wealth goes to too few people. But that doesn’t mean we should create less wealth by, for example, letting the government run businesses best left to the private sector. We want the strongest possible growth and maximum wealth!

Here’s how the US economy performs compared with other countries some people might think do better. This is total economic output per person:

Small, homogeneous nations such as Singapore and Norway are wealthier than the United States. But no large country is. Any proposal that would degrade the overall performance of the US economy should be a non-starter.

[It’s time to revise the American Dream]

2. Tackle health-care costs. We spend way too much on health care without getting materially better outcomes. Here’s health care spending in the United States, compared with other countries:

This is a longstanding and complicated problem, but the essential conflict is between a for-profit health care sector and the need to better regulate costs and pricing. MIT economist Jon Gruber has many ideas on how to reduce total health care spending, such as cutting overhead and doing more preventive care to cut down on costly emergency room visits. There are many other studies on how to rein in runaway spending.

The United States is basically the only advanced economy that doesn’t have universal health care, with basic medical services available to every citizen. That’s a travesty. Universal coverage would include preventive services for everybody, catching problems early and stopping some of them from becoming chronic or deadly.

Universal coverage does not mean “Medicare for all,” as Bernie Sanders would prefer. Putting all health care under government control would be so disruptive that it’s not feasible. Plus, the employer-sponsored health care system that covers about 160 million Americans works reasonably well. We should leave that more or less alone while getting everybody covered. The Affordable Care Act addressed part of the coverage problem and could be expanded to address the rest. The best possible outcome is a piecemeal system that improves on what we have now, not some bumper-sticker panacea.

[I placed a bet on falling oil prices]

3. Get taxes in line with spending. The United States is a low-tax nation, with an overall tax burden far below levels in most other advanced economies. Here’s the total tax burden, including federal, state and local taxes, by country:

We shouldn’t raise taxes just to raise them. But we’ve already got an obvious problem because the federal government spends about $2 trillion more per year than it takes in. The $40 trillion national debt has now gotten too large, and it’s time to reduce annual deficits as a percentage of GDP. It would be reasonable to raise taxes to finance better health care coverage, as well. But as a country, we’re obdurate about taxes and always want them to be as low as possible.

Wealth taxes, favored by Bernie Sanders and other liberals, are unproven, hard to administer, and possibly illegal. Raising the income tax is a far more reliable way to generate more revenue. We’ve had much higher taxes on the wealthy before, with no obvious harm to the economy. That’s the obvious starting point.

[Believe it or not, the economy is strong]

Raising business taxes is trickier, because it can depress growth, which we shouldn’t do. There are many ideas for gradually raising taxes in ways that don’t upset the economy. We may eventually have to enact a value-added tax, or VAT, similar to a national sales tax, which most advanced nations have.

4. Improve the lot of workers. There’s been a long-term decline in the share of national income going to workers, while the share going to owners has been rising.

This is also a complex problem with no silver-bullet answers. But it’s not unique to the United States, and the biggest cause is probably the onslaught of digital technology, which concentrates wealth among innovators while making some skills obsolete faster than ever.

[Why soaring rates aren’t a problem—yet]

The rise of artificial intelligence presents a good opportunity to give workers a larger share of the assets that generate wealth. That could be more employee ownership of profitable firms, better support programs for displaced workers, higher taxes on capital gains, better worker training linked to the best opportunities, and other types of worker protection programs. Again, there’s plenty of research on possible improvements.

5. Make politicians more accountable. It’s probably no coincidence that worker power has declined at the same time wealthy Americans and corporations can give unlimited amounts of money to political campaigns and basically call the shots. Good-government groups want new limits on campaign donations, stronger ethics laws throughout the government, and other reforms. More open primaries, allowing independents to vote in either the Democratic or Republican contest, could also produce more moderate general-election candidates who aren’t beholden to party orthodoxy and the usual big donors.

If you think this is all hopeless, ask yourself, where is it better? France has some of the world’s most generous social benefits, but it lacks the money to pay for them and is now facing a debt crisis worse than we have here. Singapore has a model economy built on soft authoritarianism and strict rules for public behavior that would never fly here. The Nordic nations prioritize social cohesion in a way bumptious Americans never have.

Yet Americans intensely wary of government overreach have modified capitalism many times by imposing income taxes, establishing a wide array of safety-net programs, breaking up monopolies, and incentivizing activities we feel are important. It’s time for another reboot of American capitalism, and that will be better than any alternative.

Enjoy a cartoon.

You can order this cartoon👆 and play cartoon-themed puzzles and word games at CartoonStock.com.

Should you sell your stocks and activate your bugout plan? Probably not. Economists think rising rates in the bond market certainly signal something—just not Armageddon.

“Is the bond selloff a looming debt crisis? Not yet,” economist Ed Yardeni of Yardeni Research wrote in an October 5 analysis. “If we had to place the bond market at a point along the spectrum of drivers, it would be closer to the benign side.”

One factor pushing rates higher is the sheer amount of debt being issued by the US government and other nations. The US national debt tops $40 trillion and Washington now routinely borrows $2 trillion per year to fund itself. If there aren’t enough buyers of that debt, rates have to rise, which means Washington has to pay even more to borrow and interest payments might eventually become unsustainable. We may be in the early stages of such a debt spiral.

[Believe it or not, the economy is strong]

But rates are also rising because of the surge in energy prices related to the Iran war—which won’t last forever. Once oil supplies return to normal levels and prices fall, pressure on interest rates could ease.

A third factor pushing rates higher is a reversion to normal after a period of unusually low rates. “For years, yields were below where the economy said they should be,” Jim Bianco of Bianco Research wrote in an October 5 explainer on the bond market. “That is no longer the case.”

The average yield on the benchmark 10-year Treasury since 1980 is 5.6%. But from 2009 through 2025, the 10-year rate averaged just 2.72%, roughly half the historical norm. That’s because the Federal Reserve undertook extraordinary measures to slash rates during the Great Recession in 2009, and moved extremely slowly to unwind that stimulus. When Covid hit in 2020, the Fed pushed rates even lower.

[How to profit from rising rates]

That period of abnormally low rates is over. Since the Iran war started in February, the 10-year Treasury rate has jumped from 3.97% to about 5.28%—the highest level since 2002. Even if the rate isn’t that high, historically, fast, unexpected changes in rates can be destabilizing if they rapidly raise borrowing costs for consumers and businesses that aren’t ready for it.

How do we know when we’re in the danger zone?

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Oil, gasoline, and diesel prices have been elevated since the first day of the war. The pre-war price of West Texas Intermediate, the US oil benchmark, was $67 per barrel. It went as high as $113 in April and is now around $89. Everybody knows about the corresponding spike in gasoline prices, from $3 per gallon before the war to around $4.50 now.

But this [probably] can’t last, and I put my money where my guess is. I placed a $50 bet on Kalshi on September 29 wagering that oil prices will be lower than $75 per barrel at the end of the year. That was the lowest price I could find a market for. I’d be willing to bet that prices fall below $70, but I think that’s probably the floor.

[5 things to expect if Democrats win in November]

Here’s my reasoning. Though Iran seems intransigent, the US blockade of its ports is stopping most of the country’s oil exports and squeezing its economy. The ruling mullahs need that oil revenue. That’s how they stay in power and finance all the regional proxy groups that wreak havoc on their behalf. Iran’s leaders talk a big game about menacing the Strait of Hormuz until Trump leaves office in 2029. But that’s bluster.

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Then there’s the economy. Many Americans might be surprised, but the US economy is strong. That can also push up rates, because buoyant spending means more demand for products, higher prices, and more inflationary pressure.

“The slowdown feared early this year never arrived,” economist Ed Yardeni of Yardeni Research explained in a recent analysis. “The labor market remains strong.” Among the solid indicators: Consumer spending is up, business investment is robust, job growth is steady, and unemployment is low.

The Atlanta Federal Reserve’s GDPNow tool pegs third-quarter real GDP growth at 5%. That would be more than twice the average growth rate since 2022. That estimate could decline by the time official GDP figures come out at the end of October. But even 3% growth would be stronger than the post-Covid average.

For millions of struggling Americans, President Trump is the loudest source of cognitive dissonance. Trump repeatedly touts “the greatest economy in American history,” a claim he hopes will save his fellow Republicans from a bloodbath in the midterm elections on November 3.

[5 things to expect if Democrats win in November]

What most Americans see, however, is gasoline prices driven to $4.50 per gallon by Trump’s Iran war and the energy crisis it caused. Diesel prices, at record highs around $6.50 per gallon, portend months of higher food costs. Overall inflation is persistently high and getting worse, not better. And inflation is growing faster than incomes, which means the typical worker’s paycheck buys less.

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But it’s a good opportunity to ask, are we still engaged in a trade war with China? After all, Trump risked a stock-market blowup in the spring of 2025 when he launched his “Liberation Day” tariffs, which Wall Street promptly dubbed “Obliteration Day,” because the stock market tanked. For a few weeks in the spring of 2025, the Trump tariffs on some Chinese imports went as high as 145%.

It’s a very different story now. Import taxes are substantially higher under Trump, with Americans paying the cost. But Trump is nowhere near the trade gunslinger he was at the start of his second term. China, for one, called his bluff and retaliated effectively. It restricted exports of certain semiconductor and rare-earth minerals, threatening U.S. auto, defense, and high-tech supply chains. China has a near monopoly on some of those products, making US dependence a major vulnerability.

[5 things to watch for if Democrats win in November]

China also slashed purchases of US farm goods such as soybeans, pork, corn, and wheat, sourcing them from other countries. The two countries struck a trade truce last October, with Trump lowering tariffs on Chinese goods and China pledging to resume US food purchases. But Chinese purchases are picking up slowly. That’s now a political vulnerability for Trump among rural voters in farm country who thought Trump had their back.

Tariff rates show the extent of Trump’s backpedaling. The average tariff on Chinese imports soared from 11% to 48% during Trump’s first few months in office. It has now drifted back to about 22%—not as draconian as before, but double the rate Trump started with.

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There’s been a lot of coverage of how rising rates affect home buyers and anybody else taking out a loan. Basically, loans cost more and costs go up, duh. That’s bad for consumers.

But rising rates also mean higher returns for investors, as long as you know where to look. A quarter-point hike may not sound like a lot. But we’re in a rising-rate environment, and it’s possible that interest rates might be resetting higher for the foreseeable future. That can add up, which means it might be time for investors to rotate a bit more money into the right bond funds.

There are different types of interest rates, based on the underlying securities that set them. They can be very different. US Treasury securities, for example, range from four weeks at the short end to 30 years at the long end. Most ordinary investors don’t hold bonds anymore. Instead, they own money-market funds that invest in short-term assets, and other kinds of mutual funds and ETFs with diversified holdings. This makes the investments liquid compared with bonds you’d hold until they fully mature.

Beware bonds?

Bonds and bond funds are more complicated than stocks, because there’s both a price and a yield, and they move in opposite directions. For simplicity, this discussion will focus on money-market funds. There are many guides to the broader world of bonds at sites such as Investopedia, Morningstar and every major brokerage.

[The Weekly WTF: Trump says gas is cheap]

The return on money-market funds during the last decade has been low because interest rates have been relatively low. But that’s changing, as the following chart illustrates. It shows the yield on the 10-year Treasury note, which is set by markets, the short-term rate the Fed sets, and the yield or return on a typical money-market fund, using Fidelity’s main MMF as a proxy. (If you want to get into the weeds on the difference between rates and yields, here’s a good place to start.)

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Persian Gulf oil producers, working with the US military, finally seem to be shipping oil through the Strait of Hormuz on a sustainable basis, while building workarounds that will reduce their long-term reliance on the waterway Iran seeks to dominate. Iran’s leverage over global oil markets is likely declining while its own economy crumples.

Oil shipments through the Strait of Hormuz averaged about 19 million barrels per day before Trump launched the Iran war on February 28. That sank to a daily average of just 6 million barrels in May, causing soaring prices for oil, gasoline, diesel and related products. Those waterborne shipments now seem to have grown to about 10 million barrels per day, and there’s reason to think the region’s exports will continue to rebound.

[It’s time to revise the American Dream]

The same Gulf states are also exporting more oil via pipelines that bypass the strait, and by trucks that drive west to ports on the Mediterranean. “A lot of the countries are now bouncing back from their lows,” Samir Madani, co-founder of Tanker Trackers, said on a Sept. 9 podcast. “There’s a lot more volume going through on the days those convoys pass through.”

The most interesting developments are in the Strait of Hormuz, where Iran essentially blocked all oil shipments except for its own during the first few months of the war. Petrostates such as Saudi Arabia and Kuwait, working with the Pentagon’s Central Command, now seem to have developed new tactics that allow tankers to evade Iranian fire as they move oil through the strait.

Tankers belonging to the petrostates’ national fleets shuttle oil through the strait in convoys at night, when it’s hardest for satellites to track them. They hug the Omani coastline, as far away from Iran as they can get.

US military assets such as helicopters, fighter jets and drones provide air support, in case Iran targets them with drones or missiles. Manned Navy ships probably don’t sail alongside the tankers, but they can fire defensive weapons from farther away in the Persian Gulf or the Gulf of Oman. The Navy may be using unmanned sea drones closer to the tankers, in the strait itself.

Waiting on the other side of the strait, in the Gulf of Oman, are dozens of commercial tankers that take on the oil from the state-owned ships and move it to their destinations, mostly in Asia. These ship-to-ship transfers are cumbersome and time-consuming, adding several days to a typical oil delivery.

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The Federal Reserve is about to do exactly the opposite of what President Trump wants it to do. Trump has threatened economic mayhem if he doesn’t get his way. Markets think Trump is bluffing. If they’re wrong, hard times are coming.

The Fed seems very likely to raise short-term interest rates at the policy-setting meeting that concludes September 16. Inflation is too high, and it’s the Fed’s job to get it down. The usual method is raising rates to cool the economy and soften demand. Prediction markets put 80% odds on a rate hike.

Trump wants lower interest rates, not higher rates. On September 4, Trump said on social media that if the Fed doesn’t cut rates, he will “stop trading with countries with which we have a deficit.” That’s roughly 100 countries, including huge trading partners Canada, Mexico and China.

The Fed is now set to call Trump’s bluff. Will he do it?

[It’s time to revise the American Dream]

Probably not, but Trump has gone from verbally browbeating the Fed to threatening tangible damage. Trump obviously doesn’t follow through on all of his threats, but he does act on some of them, incrementally. Trump could ban some imports from some countries, to test the waters. He’s already threatening to ban some Canadian imports, in a separate trade rampage. Import bans are starting to sound like a new Trump fixation.

This is insane, of course. We’re already dealing with the depressing effect of Trump’s tariffs and the energy crisis caused by his war with Iran. Growth has slowed during Trump’s presidential term, and real incomes, adjusted for inflation, are negative. That means the typical worker is falling behind under Trump. Putting new limits on trade would only make this worse.

Here’s how we got here. Inflation has been elevated since the tail end of the Covid pandemic in 2021, hitting a peak of 9% in 2022. The Fed wants inflation of around 2%. We almost got there in the first half of 2025, when inflation got as low as 2.3%.

But then Trump started imposing tariffs. Inflation started inching back up. The Iran war Trump launched in February sent energy prices spiking, and inflation took off again.

The Fed has been waiting to see if the Iran war subsides and energy prices drop. The Iran war keeps not ending. In fact, new developments are making the energy crunch worse.

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During the 1990s, the 10-year Treasury rate averaged 6.6%. During the 1980s, it averaged 10.6%. Those were both prosperous decades with strong growth and improving living standards.

What’s different now, however, is the US government runs massive annual deficits topping $2 trillion, with a national debt of more than $40 trillion. That means small changes in interest rates can have large effects on the US government’s finances. At some point, it could become difficult to manage, with the government’s interest costs skyrocketing and little money left for anything else.

“A renewed focus on deficits is warranted given the rise in rates,” Bank of America economists wrote in a Sept. 4 research note. “The fiscal challenge is increasingly about interest expense, which now exceeds spending on both defense and Medicare and is still rising. The biggest long-run risk is a feedback loop in which higher rates raise deficits, larger deficits increase Treasury supply, and higher term premiums push borrowing costs even higher.”

[The Weekly WTF: Interest rates befuddle business genius]

Two charts convey the problem. The first shows the annual interest payments on outstanding federal debt. The figure crept upward from $331 billion in 2001 to $521 billion in 2020. But then interest payments mushroomed, rising to almost $1.2 trillion in 2025. The Congressional Budget Office estimates interest payments will hit around $1.3 trillion in 2026.

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But if your goal is to build wealth—regardless of the form—there’s powerful evidence that stocks are the way to go. Financial assets are far more liquid than real estate. You can buy small amounts without saving up for a five-figure down payment. You don’t need to take out a loan to buy stocks (and you shouldn’t!)

But most of all, the return on stocks during the last 35 years has obliterated the return on real estate.

In 1990, Americans held more than three times as much wealth in real estate than in stocks. The old adage was true: For most families, their home was their biggest asset.

The amount of financial wealth almost caught up during the dot-com boom of the 1990s. But the dot-com bust corrected that. A long rally in stocks began in 2009, at the nadir of the Great Recession, and stock wealth surpassed real-estate wealth for the first time in 2021. Today, Americans hold $55.1 trillion in stocks, compared with $48.7 trillion worth of homes and other properties, according to Federal Reserve data.

[What the bond market wants you to know]

An important statistical note: That stock-market wealth doesn’t include retirement plans such as IRAs and 401(k) plans or stocks held by traditional pension plans. It’s just the amount people hold in individual shares, mutual funds and exchange-traded funds at brokerage firms. Adding stocks held in retirement plans pushes the amount of financial wealth substantially higher.

The case for stocks is even more stark when looking at appreciation. Since 1990, the median sales price of a home in the United States has risen from $123,900 to $410,700, according to Census Dept. data. That’s a nifty 231% gain.

But stocks have vastly outperformed that. The S&P 500 stock index has risen from 334 at the beginning of 1990 to 7,600 in 2026. That’s a 2,178% gain since the beginning of 1990, or 9.4 times the return on real estate. And that does not include reinvested dividends.

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The second is a recent Foreign Policy article by Stephen Walt that ponders “why the United States keeps losing wars.” We don’t lose every war. But we seem to be losing President Trump’s war against Iran. The Iraq incursion that began in 2003 certainly wasn’t a win. And the Afghanistan war that began in 2001 ended ignominiously in 2021, with the Taliban regaining control of the country. The connective thread is that these are wars of choice for America, but they are wars of survival for perceived foes we try to impose our will on. They have more at stake than we do and therefore the will to tough it out longer. Meanwhile, we squander blood and treasure.

If America is facing a comeuppance, we probably deserve it. As a nation, we’ve been fiscally irresponsible for 25 years, spending money we didn’t have and racking up $40 trillion in debt. Trump didn’t cause every current problem, but his petulance toward friends and foes alike is fitting. We’re a spoiled rich kid who’s grown up to be entitled and bossy.

Most of this doesn’t matter to ordinary Americans right now. Investors are fixated on a restless bond market that seems to be signaling that America’s debt binge is entering the danger zone. But if you need a loan for a house or a car, you can easily get it, at interest rates that are still lower than historical averages.

[The Weekly WTF: Operation Economic Nothingburger]

Unemployment is low. Whatever is going on in the bond market, it isn’t causing mass layoffs. And rising interest rates don’t seem to bother the stock market, which is close to record highs. Most Americans don’t live off investment gains, but many have 401(k) retirement plans that have gotten a lot cushier during the last three years.

So the public carps about the elevated cost of gasoline and hamburger. The bond market isn’t their problem. But it might be their problem the next time there’s a recession. And there will be another recession.

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Sorkin frames his book as a warning for those who forget the past, or fail to ever study it. He chides those who believe “this time is different.” His point is that greed is irrepressible, universal, and timeless, and will always find a way to bilk the system and endanger it.

It’s an apt moment to ponder greed, financial manias, and human folly. The stock market has been on a tear for nearly three years, enriching millions lucky enough to own stocks. President Trump wields a deregulatory axe, slashing rules meant to protect consumers and keep businesses honest.

[What the bond market wants you to know]

Trump also sets a personal example of rapacious greed by operating a pay-to-play presidency in which patronizing his businesses helps the rich and powerful get favorable treatment. His family’s crypto firm ran a de-facto pump-and-dump scheme to capitalize on the impression that Trump, as president, would send crypto to the moon. Gullible buyers lost billions. He now plans to open a bank that will allow institutions to pay hefty fees as tribute to the king.

Sorkin wants his readers to feel a sense of alarm at the way modern markets operate. Yet revisiting the stock-market crash of 1929 made me appreciate everything we’ve done to improve the financial system and prevent disaster. In the aftermath of the crash, reforms addressed many abuses that were legal in the 1920s but no longer are. Nearly 100 years later, the record of those reforms is remarkably solid. In a way, it’s amazing what we get away with today, because the system protects us against our own profligacy.

Sorkin’s book is a reminder that the most astonishing thing about the 1920s is what was legal. Shrewd investors routinely formed pools and trusts explicitly to manipulate stock prices. They’d quietly buy certain stocks in coordinated fashion, driving the price up. Then a leak would appear in the press, touting the hot stock, as if it could only go up. Ordinary Joes would start buying, sending the price even higher. Then the smart money would sell, locking in profits, which would tank the stock and leave the little guy with losses. Again: That was legal.

[The Weekly WTF: $40 trillion in the hole]

Insider trading was also legal. Investment banks sold stocks to politicians and favored customers at below-market prices, generating instant profits. Stock speculation was all the rage and banks encouraged their customers to get in on it. Just about anybody could start a local bank, with few regulations meant to assure solvency.

It’s still hard to say definitively what caused the 1929 market crash, or the depression that followed. But financial markets in the 1920s were a carnival of deception and fraud. Some sort of comedown was inevitable. The failure of 9,000 banks during the next five years amplified the pain, and foolish policies such as the Smoot-Hawley Tariff Act of 1930 made a bad situation worse.

What does this tell us about today? It’s self-evident that many reforms of the 1930s reined in fraud and shored up the banking system. Insider trading and stock manipulation are now illegal. Federal agencies now regulate and insure banks, oversee stock trading, and prosecute offenders. Abuses still happen—and will always happen—but there’s a general sense of confidence that rules and laws govern US financial markets and keep the banking system stable.

[A Subaru capitalist takes on the “Subaru Socialists”]

We tested all this during the market crash in 2008, when the failure of Lehman Brothers triggered a run on institutional banks. That was driven by widespread speculation in the housing market, similar to the stock speculation of the 1920s. Fraudsters exploited loopholes and fools took the bait they dangled, on a massive scale. It took aggressive federal intervention, including unprecedented action by the Federal Reserve, to stabilize the system. A nasty recession ensued, but safeguards built during the prior 80 years prevented a depression and saved humanity from its own gaping flaws.

We put new protections in place after the 2008 crash to prevent those particular problems from recurring. So are we perfectly safe now? Of course not. But the next war never looks quite like the last one, and our ability to screw up evolves just as technological progress evolves.

The problem we have today is that we take our safeguards for granted, which you might characterize as excessive moral hazard. There’s so much safety in the system that it enables dumb decisions. It’s one reason the US national debt has ballooned to $40 trillion and is certainly going higher.

The Fed and the Treasury could probably manipulate inflation or interest rates, or both, as a way of reducing the size of the debt relative to the economy. That kind of federal power was unimaginable in 1929. The markets know it, one reason investors have been willing to lend the US government so much money in the first place.

[Trump’s biggest grift yet]

The Fed has kept long-term interest rates artificially low since 2009, a form of monetary stimulus known as part of the “Fed put.” It’s a powerful pushback against market discipline that keeps rates lower, stock prices higher, and the economy rosier than if the Fed stayed on the sidelines. The Fed has tried to unwind this unusual form of stimulus, but at a snail’s pace that has basically left an emergency measure intact nearly 20 years after the emergency.

Maybe we can do this forever, with no downside. But we might just be delaying the point at which we need to address fundamental problems, such as the national debt. And the ability to delay means the problem will be far worse once we address it than if market forces compelled us to deal with it earlier.

Other safeguards make the economy stable enough to withstand Trump’s ridiculous tariffs and his foolish protectionism, which raise costs on everybody and reduce growth. One of the most prominent lessons of the Great Depression was the disastrous effect tariffs can have when overused. Trump is blundering into the same trap, and getting away with it, because of rigorous efforts to stupid-proof the economy under many of his predecessors.

[The myth of the prosperous worker]

Trump is also trying to manipulate the Fed into goosing the economy even more, as if there will never be a price to pay, at least not under his watch. The Treasury Dept. recently got into the act, announcing plans to manipulate the bond market to bring long-term rates down. There’s even a proposal to reduce the reporting requirement for public companies from quarterly to semi-annual. There’s no obvious problem with quarterly reporting, except that it’s more of a bother for companies than doing it less frequently.

Our system is showing it can withstand boneheaded mistakes, one at a time. But there could be a breaking point at which the combined weight of needless, man-made strains causes fractures. We’re stress-testing the safeguards built during the last century.

This time is different, but with the same overconfidence and self-interest that have always tripped us up.

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Jim writes frequently about the Federal Reserve, which is in a state of flux under new Chair Kevin Warsh, who took over the central bank in May. Warsh has appointed five task forces to review the way the Fed does business and suggest reforms. One issue under review is whether the central bank should continue to offer “forward guidance” that lays out its future plans on the direction of interest rates and other matters.

Warsh has argued for doing away with forward guidance. Jim generally agrees. Others think the Fed should continue telegraphing its moves, to prevent misunderstandings. This will be a topic of much debate in coming weeks and months as the Fed makes some crucial decisions about the path of inflation and interest rates. The task forces are due to report back at the end of the year, and changes could follow in 2027.

[What the bond market wants you to know]

Here’s a short discussion with Jim on forward guidance. Takeaways follow. My full chat with Jim at Camp Kotok, including some additional discussion about the Fed and the broader economy, is at the end.

• The Fed wasn’t always so chatty about what it might do in the future. Famed Fed Chair Alan Greenspan, who ran the Fed from 1987 to 2006, was notoriously opaque in his public statements, to avoid having any effect at all on markets. That was the custom at the Fed for most of its history.

• The Great Recession changed things. The Fed started to become more transparent during the Great Recession in 2008 and 2009, under Chair Ben Bernanke. The Fed enacted massive amounts of complex monetary stimulus during that crisis, to prevent a recession from becoming a depression. Much of it happened with little public awareness. Bernanke argued that the public should have a better idea of what the Fed is doing when it’s pulling multiple levers. He still insists that providing a public roadmap of the Fed’s likely actions can have a powerful impact that helps stabilize markets in a crisis.

[The Weekly WTF: $40 billion in the hole]

• The press conference era dawned in 2011. The Fed, under Bernanke, began to hold press conferences four times a year, after four of its eight regular policymaking meetings. Until then, the Fed chair mainly communicated to the public through Congressional testimony and infrequent media appearances. In 2019, under Chair Jerome Powell, the Fed started holding press conferences after each of its eight regular annual meetings.

• The “dot plot” arrived in 2012. This is a graphical representation of where 19 top Fed officials think interest rates will go during the next few years. It has become an integral part of the Fed’s forward guidance.

• The Fed now bombards investors with information. Every press conference these days generates forensic analysis of the dot plot and the exact phrasing the Fed chair uses to describe the economy and the Fed’s outlook. Traders use AI to identify the slightest change in the outlook or the verbiage and spot trading opportunities. Markets sometimes surge or plunge the second the Fed chair says something unexpected.

[A Subaru capitalist takes on the “Subaru Socialists”]

• One problem with forward guidance is that it boxes the Fed in. When the Fed provides guidance, “the market takes it as a promise,” Jim says. Then, if the situation changes and the bank changes tack, “the Fed is kind of stuck.” Investors may trust the Fed less, and the Fed, in turn, may be reluctant to make changes it hasn’t telegraphed. That can distort decision-making both at the Fed and in the markets.

• Markets will adapt. What will markets do if there’s less Fed guidance? “The market’s made up of very competent people,” Jim says. “Let them figure it out on their own.”

Here’s my full interview with Jim:

The global bond market encompasses $160 trillion in debt that investors trade every day. The bond market is a better indicator of economic trends than the stock market, which is subject to bubbles and abrupt selloffs. And the bond market is beginning to signal that governments and corporations are issuing too much debt, at a time when inflations risks are uncomfortably high.

A brief bit of history provides helpful context. The Federal Reserve intervened in bond markets during the Great Recession in 2008, buying several trillion dollars’ worth of bonds in order to force long-term interest rates down. It worked, and probably prevented a nasty recession from being worse. The Fed did something similar during the Covid pandemic in 2020. That drove rates on loans such as mortgages to all-time lows.

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When Trump took office in 2025, his Treasury Secretary, Scott Bessent, laid out a “3-3-3 plan” for rejuvenating the economy. The three threes stood for:

• Pushing real GDP growth to 3%

• Cutting the annual federal deficit to 3% of GDP

• Pumping an additional 3 million barrels of oil per day

Those were stretch goals nobody expected Trump and Bessent to hit any time soon. But progress toward those goals would be an accomplishment in itself. Stronger growth would make more Americans better off and bring in more tax revenue to help lower the annual deficits in the federal budget. More oil production would mean lower energy prices and a stronger hand for the United States in global energy markets.

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A year and a half into Trump’s term, those targets seem further out of reach than ever. And Trump’s own policies are partly to blame. Let’s take them one at a time.

GDP growth. During Joe Biden’s last year in office, 2024, real GDP growth adjusted for inflation was 2.4%. GDP growth fell to 2% in 2025 and the latest data shows the economy growing at just 1.5% on an annualized basis. Growth has gotten weaker under Trump, not stronger.

Deficits. Bad news here, too. In Biden’s last year, the annual deficit was 6.2% of GDP. That dropped to 5.8% of GDP in Trump’s first year, but the Congressional Budget Office estimates it will be back to 6.2% in 2026. CBO expects that number to drift higher, indefinitely.

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