Is The Bond Market About To Pop Every Bubble (Equities, Credit, & Real Estate)?

Adam Taggart | Thoughtful Money® Aug 6, 2026

Summary

Michael Pento argues shrinking the Fed's balance sheet — not rate hikes — is what bursts today's credit, equity, and real estate bubbles.

US equities sit at 230% of GDP, S&P 500 price-to-sales 70% above average, and NYSE margin debt at $1.5T — all record highs.

For the first time in history, record-sized bubbles in equities, credit, and real estate are forming concurrently — and they're interconnected.

Pento argues the bond market, not the Fed, may be the one to pop the bubble — yields already at their highest since 2007.

Pento says to size positions around what policymakers actually do, not long-term forecasts — he varies gold exposure from zero to 20%.

Top takeaway Pento argues the bond market — not the Fed — will pop the equity, credit, and real estate bubbles, noting yields are already back to 2007 highs and the market is 'starting to revolt' against inflation and fiscal insolvency.
He says this is the first time in history that record-proportion equity, credit, and real estate bubbles are co-existing, driven by Fed money printing he compares to the Central Bank of Zimbabwe.
He flags stretched equity valuations as of mid-2026: total market cap at 230% of GDP (130 percentage points above average), S&P 500 price-to-sales 70% above its long-term average, and $1.5 trillion in margin debt at an all-time record high (up 50% year over year).
He expects Kevin Warsh to shrink banking-system reserves rather than raise rates, arguing every prior attempt to drain the Fed's balance sheet has led to disaster.
He warns inflation has become a 'huge problem' both politically and market-wise, with the bottom 80% of earners 'tragically eviscerated' in purchasing power — putting policy at a 'breaking point.'

Top takeaway Taggart opens by asking whether a deflationary depression is likely in the next six months to two years, framing the timeline as a function of fiscal and monetary policy choices.

Top takeaway Pento casts Warsh as an Austrian-school economist who 'means what he says,' predicting he will shrink reserves rather than raise rates and use a 'focus group taskforce' as cover for balance-sheet reduction.