Sep 8, 2026 · 27 min
US assets face a credibility test as yields rise
Unhedged Live: How Katie was “right all along”
The debate weighs whether America’s economic strength can offset political pressure, institutional doubts, rising borrowing costs and AI-related financial risks.
- 1Resilient US companies and stronger job creation support American assets, but government debt remains a serious vulnerability.
- 2A possible Federal Reserve rate hike could defend credibility while exposing the central bank to intensified political pressure.
- 3Rising bond yields reflect a contested mix of strong growth, heavy borrowing and doubts about the Fed’s independence.
Don't miss
Robert Armstrong concedes that Katie Martin may have been right about foreign investors losing confidence in US assets.
The brief
At the FT Weekend Festival in London, Katie Martin and Robert Armstrong revisit the assumption that US markets remain the safest destination as political and institutional risks mount.
America’s economy and companies remain resilient, but stronger job creation sits alongside government debt, doubts about credibility and signs that foreign investors may be diversifying away.
The hosts debate whether the Federal Reserve should raise rates to protect its independence, with Kevin Warsh facing political pressure and a divided policy committee.
Rising bond yields expose a second tension: Treasury borrowing costs are climbing as markets weigh strong growth, excessive borrowing and skepticism about the Fed’s credibility.
The conversation closes with warnings about AI-related cyber and financial-stability risks, then turns to Scotch whisky, Uber and the uncertain breadth of AI’s usefulness.
What was said on this episode
18 statements · 9 positive · 8 negative · 1 mixed
America has the world’s strongest corporate economy and deepest capital market.
“America has the strongest corporate economy in the world by a mile and matched to the deepest capital market in the world.”
Listen at 1:48
Capital will continue flowing to the United States.
“money will always come to that corporate slash financial monster that is the United States.”
Listen at 2:12
The United States has a runaway government deficit and debt.
“We have a runaway government deficit and debt”
Listen at 3:08
The United States has an institutional credibility problem.
“I think you've got an institutional credibility problem”
Listen at 6:01
August US job creation was strong given demographic constraints.
“it was a very impressive number.”
Listen at 8:11
Without AI, America would grow more slowly but would still grow.
“without AI, America would not be growing at all. And that is, I mean, we would be growing a lot more slowly, but it would still be growing.”
Listen at 8:59
The Federal Reserve should raise interest rates in September.
“later this month, September... The Federal Reserve, under the new chair, Kevin Walsh, should be raising interest rates.”
Listen at 9:51
Trump’s pressure made Federal Reserve tightening more likely.
“it made it materially more likely that the Fed will tighten.”
Listen at 13:52
The Fed chair must resist presidential pressure to preserve credibility.
“I think he really has no choice”
Listen at 14:35
The Federal Reserve will raise interest rates.
“I think they're going to hike.”
Listen at 16:14
The Federal Reserve will raise rates by 0.25 percentage points.
“I think they'll do a quarter of a percentage point.”
Listen at 16:21
Short-term rate hikes could restore US credibility and lower long-term financing costs.
“Raise rates at the short end. Establish the credibility of the United States. Long end financing will come down.”
Listen at 17:49
The United States and developed countries have excessive debt.
“the world has woken up to the fact. that not only the US, but all the developed countries have too much debt.”
Listen at 19:23
A serious AI incident could reduce the value of AI-related investments.
“a secondary kind of event where something like that happens and the value of the AI trade goes down.”
Listen at 22:16
A major AI shock could trigger a broad market crash.
“And so then you can just have a good old-fashioned market crash.”
Listen at 22:39
Debt financing magnifies companies’ existing risks relative to equity financing.
“when you have equity financing, nobody's knocking on the door to be paid immediately. And whatever risks you have in the company when it's not indebted... They're bigger when you carry a lot of debt.”
Listen at 23:49
AI investors should hope AI gains broad public acceptance like Uber.
“If you're an investor, you better hope so.”
Listen at 25:37
The whiskey business faces an unfavorable investment outlook.
“I'm short the whiskey business.”
Listen at 26:10
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
Books & mentions
Scotch whisky
The closing investment segment offers a contrarian view of excess supply and changing drinking habits.
Uber
The hosts use Uber as a comparison for whether AI can become broadly useful and accepted.