7% Treasury Yields by 2028? The Midterm Warning

Chris Casey · WindRock Wealth Management

Democrats are very likely to win both houses in the 2026 midterms.

Casey says prediction markets put Democrats at about 65% to take both houses, with another 30% for taking the House but not the Senate, so the outcome is overwhelmingly in their favour. He acknowledges prediction markets and polls are not hyper-accurate, but says Democrats have history on their side, with seven of the last eight midterms creating divided governments. He adds that they have better fundraising, likely higher turnout, gas prices at about $5 against a $4 threshold that tends to unseat incumbents, and Trump at record-low approval of about 37%. Republican redistricting gains and the European riots are weaker counterpoints.

“The predictive markets show that the democrats is like 65%. They'll take both houses... So it's overwhelmingly in their favor.”at 2:45

Chris Casey · WindRock Wealth Management

Affordability populism will stay at the centre of US politics heading into the 2028 election.

Casey says affordability became a major campaign issue, though it was not discussed much during 9% inflation. He cites rising everyday costs: healthcare premiums, electricity bills driven by data centres and an under-built grid, and food prices affected by the Iran war. He expects these populist issues to continue and be at the forefront of the 2028 election, which he says will shape the policy and markets that follow.

“So yes, I anticipate so called populist issues to continue and be at the forefront of the 2028.”at 11:03

Chris Casey · WindRock Wealth Management

Divided government means more handouts and bigger deficits, since bills pass only by buying off every group.

Casey argues that with one party controlling only one chamber, the only way to pass anything is to give something to everybody. He points out that Trump barely got anything through despite controlling both houses, and that the One Big Beautiful Bill was already a massive bill with handouts to everybody. He says it will be far worse if anything passes at all, so increased spending and deficits, or at least a status quo that is not reduced, are around the corner.

“And so when you don't control both houses of Congress, the only way to get anything passed is to give something to everybody, right?... increased spending, increased deficits, or at least the status quo, if not increased, are definitely around the corner.”at 6:25

Chris Casey · WindRock Wealth Management

The looming US debt crisis is inevitable and argues for inflation hedges, since debt is future inflation.

Casey calls the US debt problem an eventual crisis that will happen, and says it argues for every possible inflation hedge. He frames the debt as the present value of future inflation, meaning the outstanding debt is effectively priced in as higher future price levels. He says the debt problem is one of the two biggest investment themes for the next two to five years, along with AI, and that this election makes the debt situation worse, not better.

“eventual debt crisis, which will happen, right? Which argues for every possible inflation hedge you could think of because all that debt is, is really I look at it like the present value of future inflation.”at 18:28

Chris Casey · WindRock Wealth Management

Data-centre electricity demand on an under-built grid makes power a core investment theme alongside AI.

Casey cites data centres' electricity needs as a driver of higher bills, on top of a grid that has not been built out in the last fifty years to any meaningful degree. He calls it a big issue. He frames AI and its 'picks and shovels' as one of the two biggest themes for the next two to five years, and says that includes energy, commodities and electricity. He is effectively arguing that power demand tied to AI is a durable investment opportunity.

“Electricity because these data centers and the electricity needs. And the fact that we haven't built out the grid in the last fifty years any more than we have. That's a big issue, right?”at 10:50

Chris Casey · WindRock Wealth Management

Utilities face hearings and price caps over electricity charges, a regulatory risk under a Democratic Congress.

Casey says he is more concerned about Congress hauling in executives from various utilities and asking why they are charging what they charge. He expects this to happen, and that regulators will put price caps in place. He ties it to the affordability politics, since electricity bills are rising as data centres add demand. He says he is more worried about this kind of utility regulation than about the investigations of tech executives.

“I'm more concerned about them hauling in executives from various utilities. Like that's going to happen, right? Like, hey, why are you charging this? You know, and they're going put price caps.”at 12:02

Chris Casey · WindRock Wealth Management

Equities typically fall in midterm years, then rebound over the following year; third-year presidential terms are good.

Casey cites historical statistics showing that equities tend to be down in midterm years, but rebound quite nicely over the following year. He adds that third-year presidential terms also tend to be good. He says the basic background therefore sounds good for equities over the next year, while acknowledging that rising rates will still affect them.

“in general, equities are down in midterm years, they tend to rebound quite nicely over the following year. And third year presidential terms tend to be good too.”at 14:08

Chris Casey · WindRock Wealth Management

Rising rates will compress valuations of high-multiple stocks whose value sits in long-dated cash flows.

Casey says that when rates rise, they rise dramatically and quickly, and that affects equities. Stocks whose value comes mainly from long-dated future cash flows are most at risk, because those cash flows are discounted at higher new interest rates. In shorthand, companies with high multiples will see multiple compression as rates rise. He says this will not hit all equities equally, since the impact depends on which kind of equity it is.

“a shorthand way to look at it is if you have high multiples, right, you get a so called multiple compression because interest rates are rising.”at 15:01

Chris Casey · WindRock Wealth Management

A Democratic Congress will use investigative power to haul in tech executives who sided with Trump.

Casey says Democrats can act unilaterally with investigative power, especially if they control both houses. He says he is sure they will drag every tech executive who bent the knee to Trump over the last eighteen months before them. He notes that the Democrats also have regulatory oversight that could hamper deregulation in banking and crypto, and influence AI through energy production. Casey calls the investigations a non-free-society action, but his bigger concern is regulation.

“they have investigative power. I'm sure they will drag every tech executive before them that's bent the knee to Trump over the last eighteen months.”at 5:26

Chris Casey · WindRock Wealth Management

The 10-year Treasury yield could reach 7% by 2028 as the bond market belatedly prices in US debt.

Casey says the bond market is only slowly waking up to US debt, like someone hitting snooze repeatedly. Yields already rose on the 10- and 30-year this year and have since eased, but he expects them to climb much higher as investors realise US debt is an existential threat. He notes debt near $40 trillion, with revenue of about $5-6 trillion against spending of $6-8 trillion. He calls bonds the most underreported story of the last five years, with bonds losing money year over year in what he describes as an unparalleled bear market. He says a 7% 10-year yield by 2028 would not shock him and is a realistic possibility.

“I could see interest rates going much higher as the investment community realizes that there's no hope... I wouldn't be surprised if rates were much higher two years from now.”at 8:41

Chris Casey · WindRock Wealth Management

Government equity stakes in private companies are harmful and distort corporate strategy and governance.

Casey says the government taking stakes in private companies is a troubling trend, and he calls it socialism from a free-market perspective. He says the government has no business investing in private companies, and that stakes affect how companies are governed and their strategy, with distorted negative impacts. He notes the US government owned very few stakes ten years ago, and says the trend has accelerated under Trump, who is now muscling into transactions without even opening the chequebook. He argues this makes future regulation easier, since the government can say it owns the company or is its biggest customer.

“The government has no business investing in private companies. Zero whatsoever. It affects how they're governed. It affects strategy.”at 12:44

Chris Casey · WindRock Wealth Management

Billionaire and wealth taxes on the ballot, like California's, are a rising risk, though likely unconstitutional.

Casey says taxes are one of his biggest concerns going forward, because of rising populism, redistribution and the so-called K-shaped economy. He points to a number of initiatives on the ballot this year, including a billionaire or wealth tax, with California a big one. He says such measures are clearly unconstitutional, but investors should be cognisant of them and plan accordingly. He sees increased taxes as part of the financial repression that is underway.

“there's a number of initiatives on the ballots this year. So called billionaire tax, wealth tax in California is a big one as well. Yes, I am worried about that.”at 15:48

Chris Casey · WindRock Wealth Management

AI regulation is becoming bipartisan and will tighten, possibly sharply after a catastrophe.

Casey says AI regulation is almost a bipartisan issue, with many Republicans talking about it. He argues that Anthropic-style talk of existential threat to humanity gives support to anyone calling for nationalisation or something short of it. He expects this to continue over the next couple of years. He warns that a sudden AI-induced catastrophe would hasten regulation almost immediately with widespread bipartisan support. He says a Democratic president in 2028 might go beyond regulation, and that 'nationalism' will be used more often about AI, with direct implications for investors who should diversify beyond the hyperscalers.

“regulation on AI, yes, it's like it's almost kind of a bipartisan thing... That I think will continue over the next couple of years.”at 19:37

Chris Casey · WindRock Wealth Management

If America embraces heavy AI regulation or nationalisation, Chinese AI could be the eventual winner.

Casey says that if America goes the nationalisation or draconian regulatory route, the eventual winner may be Chinese tech, possibly Chinese AI. He says there are already many arguments for why China may win, and under that scenario it very well could. He says the trade is still under investigation: Chinese peers trade at lower valuations, and you could construct a pair trade between identical companies on either side of the Pacific. However, he notes Chinese firms bring a number of complexities, and this election will be a leading indicator.

“maybe the eventual winner is Chinese tech. Maybe it's Chinese AI... under that scenario, I think it very well could be.”at 20:46

Chris Casey · WindRock Wealth Management

Stock up on precious metals as an inflation hedge against the certain US debt situation.

Casey favours the one thing he is sure about: that there is a debt situation in the US. He argues that investors should stock up on inflation hedges, including precious metals, real estate and cryptocurrencies, because the debt is the present value of future inflation. He says that a core base of these inflation hedges lets you take riskier bets like AI, so precious metals are part of a well-positioned base.

“That's why I favor... the one that we're sure about, right? Is that there's a debt situation, right? So stock up on inflation hedges, your precious metals, real estate, cryptocurrencies.”at 23:01

Chris Casey · WindRock Wealth Management

AI valuations are a real concern and may be bubble-like, but bubbles often have real foundations.

Casey says a lot of people are concerned about AI valuations, and he cannot fault them because there are good arguments on their behalf. He says there may be a bubble-esque aspect to AI. He qualifies that every bubble has some real foundations, which AI does have. He lists AI valuations, together with rising interest rates, as the main concerns for investors.

“I think there is some concern over just AI valuations, of course... Maybe there's a bubble esque aspect to it, but every bubble has some real foundations, which of course AI does.”at 24:22