2025 Summer Leadership Series –  Experts Debate U.S. Debt Sustainability and Market Leadership 

In the fourth installment of Connect Money’s 2025 Leadership Series, experts tackled one of the most pressing macro questions: is the U.S. fiscal trajectory sustainable, and are markets adequately pricing the risks of mounting debt?   At the same time, they assessed whether the dominance of U.S. equities—buoyed by a decade of tech leadership—will continue, or if international markets are positioned for relative outperformance. 

Read further for insights from Warren Thomas, Co-Founder and Managing Partner, ExchangeRight; Jay Frank, President, Cantor Fitzgerald Asset Management; Mike Hurley, Chief Market Strategist, NexPoint; Michael Underhill, Founder and CIO, Capital Innovations; Heidi Wheatley, Founder, Sponsor Growth Solutions; Derek Schug, Head of Portfolio Management at Kestra Investment Management; and Garett Bjorkman, CEO, PEG.    

We’ve seen fiscal discipline concerns re-emerge. Do you think markets are adequately pricing the risk of debt sustainability — or are we ignoring a potential time bomb?  

Warren Thomas, Co-Founder and Managing Partner, ExchangeRight: There has been a quiet complacency surrounding the national debt burden that remains deeply concerning. While markets continue to price in the possibility of a soft landing and rate cuts, there remain many structural imbalances beneath the surface. The current fiscal trajectory is still unsustainable, with rising entitlement obligations, sustained deficits, and increasing interest payments consuming a larger share of GDP. The current Administration is beginning to address some of these issues, but there is still a long way to go.

This is not merely a policy concern; it represents a long-term threat to purchasing power, tax policy, and overall economic stability. The market may delay pricing these risks, but the underlying math is clear and unavoidable. For prudent investors, the solution is not to react emotionally but to position defensively. That involves allocating capital to cash-flowing, real assets that operate necessity-based businesses and are supported by long-term leases. It also means identifying structures that do not depend on refinancing or speculative outcomes. In our view, this is the time to be building portfolios that can weather fiscal volatility, not chasing yield in sectors vulnerable to the next fiscal and monetary policy shock. 

Jay Frank, President, Cantor Fitzgerald Asset Management: Persistent fiscal deficits and rising debt levels are no secret, and the expansion of the money supply keeps upward pressure on everyday costs, even when headline inflation eases. While you can’t control government spending, investors may benefit from revisiting asset allocation with an eye toward real assets and businesses whose revenues reprice through contractual increases or explicit CPI escalators.  

Jay Frank

Private infrastructure fits this profile. It has historically delivered higher returns with lower volatility than equities, and its performance has been essentially the same in periods when inflation was above or below the Federal Reserve’s 2 percent target. The asset class has also experienced materially shorter drawdowns than stocks, bonds, or private real estate, underscoring its durability. Multifamily housing shares similar strengths, as short lease terms allow rents to adjust quickly while demographic tailwinds reinforce long-run demand. 

Is the leadership story still U.S.-centric, or do you see real catalysts for international outperformance?    

Mike Hurley

Mike Hurley, Chief Market Strategist, NexPoint: While speculating about catalysts is really just guessing, we are now (finally) starting to actually see some decent outperformance in the overseas markets. While these are unhedged and not a perfect proxy for relative performance, the EFA & EEM ETFs are up 18% YTD (as of July 29th), which is more than twice the 8% advance in the SPY. 

Again, while not a perfect comparison and an arguably short window, we believe the 10-year+ stretch of underperformance in overseas markets relative to the US is likely coming to an end, and investors would be well-served to allocate a portion of their assets to overseas markets. 

Michael Underhill, Founder and CIO, Capital Innovations: The U.S. is still the quarterback — but leadership is becoming more polycentric. India’s digital infrastructure, Latin America’s commodities renaissance, and Europe’s energy reconfiguration are creating real catalysts. Investors are tactically tilting toward regions with policy tailwinds and demographic momentum. 

Michael Underhill

What’s the one market stat you’d share with an investor who’s feeling too complacent right now?  

Heidi Wheatley

Heidi Wheatley, Founder, Sponsor Growth Solutions: Five in 10 advisors surveyed now allocate over 10% of client portfolios to alternative investments, with nine in 10 planning to boost allocations over next two years. CAIS, Mercer survey December 2024. Then I would argue that it’s often not complacency investors are currently feeling right now— its uncertainty caused by the daily market swings caused by policy shifts and lack of clear direction. Today’s environment is making even experienced investors pause. 

That’s one of the reasons more investors—and their advisors—are turning to non-correlated, income-generating alternative investments. Whether it’s private credit, real assets, or other structured income strategies, these options can offer more consistent cash flow and help insulate portfolios from broader market swings. In uncertain times, having a source of predictable income outside the public markets can help investors re-engage with confidence. 

Derek Schug, Head of Portfolio Management at Kestra Investment Management: Most people assume the US stock market is relatively balanced between growth and value stocks, but these two segments of the market can diverge at times. Today, we are seeing one of the more extreme divergences in the Russell 1000 Growth and Value indices.  

Derek Schug

A little more than 10 years ago, these two indices held approximately the same number of stocks: in mid-2014, the Growth index held 671 stocks and Value 684. Fast forward to the end of last month, and those numbers were 385 for Growth and 874 for Value. Similarly, the % in the top 10 holdings in mid-2014 for Growth was 20.4%, while Value was more concentrated at 24.6%. Today, Growth has 58.7% of its weight in the top 10 holdings compared to 17.4% for Value. The tricky question for investors is whether this trend will continue or if it’s time to bet on its changing direction sometime soon. 

Garett Bjorkman

Garett Bjorkman, CEO, PEG: Multifamily values are down 19% from their recent highs, according to GreenStreet, and cap rates are at 10-year highs. Yet, in Q1 and Q2 of 2025, the U.S. absorbed 3.7x more units than were started. That supply-demand imbalance signals a strong forward trajectory for well-located, high-quality rental housing. Complacency is not an option when the market is recalibrating this quickly. These shifts are creating generational opportunities for those ready to move with discipline and vision. 

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