Goldman Sachs President John Waldron Says Big Macro Risk Not So Much Trump Tariffs But Washington's Burgeoning Appetite For Debt

Goldman Sachs Group GS President John Waldron warned Thursday that bond traders now view Washington's swelling debt load as a greater threat than Donald Trump's trade fights, labeling the fiscal outlook "somewhat concerning."

What Happened: Speaking at Sanford C. Bernstein's strategic-decisions conference, Waldron said "the big risk on the macro right now is actually not so much tariffs" but the torrent of new borrowing that is pushing up long-term rates. Rising supply already hoisted the 30-year yield to 5.15% last week, a level last touched in 2007, after the Congressional Budget Office projected federal debt could reach 117% of GDP within a decade.

Waldron, widely regarded as the front-runner to succeed CEO David Solomon, said a steeper yield curve threatens to lift financing costs "across the economy," from mortgages to corporate loans, reported Bloomberg. He added that Capitol Hill's push for fresh tax cuts would only deepen the deficit, feeding what he called a more disciplined bond market that is demanding fiscal restraint.

Even so, Waldron praised the "tremendous resilience" of U.S. consumers, noting Goldman priced eight IPOs last week despite second-quarter investment-banking revenue lagging the first quarter amid tariff-driven market swings.

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His caution was echoed by Goldman vice chair and former Dallas Fed chief Rob Kaplan, who told Bloomberg TV that clients care more about the 10-year Treasury yield than the Fed's policy rate.

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Why It Matters: Treasury traders rode a roller coaster last week as Chair Jerome Powell vowed to keep rates high until inflation cools, even while investors kept betting on a first cut by late summer. Markets, in short, kept pressing a "run-it-hot" trade that stock and bond prices eagerly priced in — even as companies and economists struck a far gloomier tone.

That divergence complicates a tentative comeback for the classic 60/40 portfolio, which has lately beaten the S&P 500 with less volatility thanks to the return of the old stock-bond inverse correlation. The rally now wobbles because the 30-year Treasury's surge past 5% makes investors wary of long-duration debt at a time when ballooning deficits threaten still-higher rates.

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