Satyajit Das, a former banker and the author of Traders, Guns & Money, wrote in a Sept. 23 MarketWatch column titled The ingredients for a market crash are all in place that the setup for a market break is largely already there.
Das framed the risk as a recipe with six ingredients: stretched valuations, high debt and weak cash availability, elevated volatility, higher funding costs, channels of contagion, and weak shock absorbers. He said those ingredients are now effectively sitting on the kitchen bench. The article also noted that this is one commentator’s view, and that market data and outside analysis from the same week offered evidence both for and against that call.
Valuation and debt are at the center of the warning
Das argued that since 2000, asset prices have continued to rise faster than the cash flows underneath them, leaving both property and equity valuations overstretched. Global debt stands at about $348 trillion, equal to 308% of world output, versus roughly $210 trillion a decade ago. In his view, it now takes more debt to generate the same level of economic activity.
He said government debt as a share of GDP has reached 252% in Japan, 127% in the United States and 106% in the United Kingdom, up by 116, 71 and 69 percentage points respectively from 2000. He added that the true burden may be higher once unfunded liabilities such as healthcare, long-term care and pensions are included.
Das also pointed to leverage on the corporate side that is less visible on the balance sheet. He wrote that off-balance-sheet financing arrangements at Alphabet, Microsoft, Amazon, Meta and Oracle have reached $1.65 trillion, above their combined on-balance-sheet debt of $1.35 trillion. He also described a financing loop in which chipmakers support customer purchases through what is labeled as investment, while data center operators monetize user commitments. Whether those arrangements can be honored, he said, depends on whether AI revenue grows sharply.
Refinancing pressure and contagion channels
The column estimated that about $6.7 trillion of debt must be refinanced at higher rates by 2028. That total includes $1.2 trillion of non-investment-grade debt and $330 billion in private credit. The U.S. government, he wrote, also has to refinance about one-third of its Treasury debt each year.
On contagion, the piece said U.S. banks have around $410 billion to $540 billion of exposure to private credit funds. Banks in the U.S. and Europe also have a combined $4.5 trillion of exposure to non-bank financial institutions through prime brokerage activities.
Shock absorbers look weaker, even without a trigger
Das argued that the market’s capacity to absorb selling pressure in a crisis has diminished. Firms now doing much of the market-making are quantitative trading shops, and in periods of stress they are often users of liquidity rather than providers of it. He also said regulators are loosening bank capital requirements at the same time.
Central bank balance sheets still total roughly $20 trillion, well above the $5 trillion level seen in 2007, while fiscal deficits remain high. In that reading, the room for large-scale rescue measures is limited. As for the trigger itself, Das said it is often something like a geopolitical event, a natural disaster, a default, an unexpected economic release or an aggressive rate move.
The most visible line this week: higher funding costs
Among the risks he listed, rising funding costs were the easiest to see in real time this week. According to Bloomberg, the U.S. 10-year Treasury yield rose to 5.20% in Asian trading on Monday. The Financial Times said on Friday that long-dated Treasury yields had climbed to their highest level since 2004, capping the bond market’s worst week of 2024.
The cost of higher rates is already showing up. CNBC reported that AI companies borrowing heavily to build data centers are seeing financing costs rise along with yields. Fortune, citing analysis, said newly issued U.S. debt carries yields of around 5% while medium-term nominal economic growth is only about 4%, raising the possibility of a debt spiral. Bloomberg also said the bond market is moving closer to a warning signal, with the Federal Reserve’s series of rate hikes pushing attention toward the risk of a sharp economic slowdown.
The opposing case: the economy is still hot and money is still flowing in
Not everyone sees an imminent crash. Investors interviewed by the Financial Times said surging yields have done “absolutely nothing” to cool the still-strong U.S. economy. A separate Financial Times report said foreign investors bought more than $940 billion of U.S. equities in the 12 months through July, a record.
Barry Ritholtz, founder of Ritholtz Wealth Management, said on a Bloomberg program that higher yields reflect a return to more normal rates, along with inflation pressure, and are not necessarily a crisis signal.
Why crypto markets are watching
For crypto, the article said Bitcoin remains closely tied to broader risk assets. If U.S. equities correct, the digital asset market is unlikely to be insulated. Even so, there is no clear sign of weakening flows for now. The Block reported that spot Bitcoin ETFs recorded $2.4 billion in net inflows last week, bringing year-to-date flows back into positive territory.
As of Monday morning Taiwan time, Bitcoin was trading at about $84,300, with a 24-hour move of less than 1%.
The article ended on a narrower point: conditions being in place does not mean a crash is about to happen. Valuation and debt issues have been around for years. What matters is when a trigger appears, and in what form. It said U.S. labor data due later this week, whether credit spreads widen, and refinancing conditions for non-investment-grade borrowers will be among the first indicators to test Das’s warning.