1. Global bond rout deepens as inflation fears mount.

More than two months into the Middle East war, investors are beginning to fret about the economic fallout from the conflict as inflationary pressures mount and what that would mean for the global interest rate outlook.

Markets are now pricing in a more than 50% chance the Federal Reserve would raise rates by December, according to the CME FedWatch tool, while the European Central Bank is seen hiking as early as next month.

Bonds have extended their rout as 10-year Treasury yields hit their highest since February 2025 at 4.631%, and 30-year yields reached 5.159%.
The jump in borrowing costs will further widen Washington's already gaping budget deficit, adding repayment concerns to inflation worries.

2. Rising yields tend to put pressure on equity valuations.

Higher interest rates means companies and consumers will face higher borrowing costs. This can also weigh on economic growth and corporate profits, while possibly making bond returns more competitive with stocks.
Higher yields also raise the discount rate for future corporate earnings, testing already stretched equity valuations in some sectors. While earnings have been generally upbeat, analysts at Citi caution the improvement owes much to one-off windfalls, including tariff repayments.
Citi estimates just 20 stocks contributed almost all the upside surprise in earnings. Exclude AI and energy, and S&P 500 earnings estimates were flat for 2027.
Which sets the stage nicely for AI-diva Nvidia on Wednesday where expectations are sky-high. The company handily beat expectations last time and the stock still slid after the bell.

Below: A rising 10-year yield has often brought pressure on stocks.

3. Germany needs to be resuscitated but the ECB has other priorities.

Consensus GDP forecasts for 2026 have been revised down from more than 1% to just 0.66%, while inflation forecasts have climbed above 2.7%.
Worse, against this backdrop, the ECB is now expected to raise interest rates twice, whether an actual inflationary spiral is taking place or not.
This looks like a mistake that could already be hampering growth and will ultimately need to reverse course.

4. Europe needs strategic autonomy in air defense and missile capabilities.

NATO targets point to a ~$390bn cumulative market in Europe over 10 years for global air defence suppliers.
If the European Commission's target is achieved (50%-60% equipment procurement in Europe), it could translate into a $240bn opportunity for European players.

Below: European annual spending allocated to EU players could increase ~16x

5. Agentic AI needs a rewrite of the AI infrastructure.

In this agentic era, performance will not come from one processor doing everything but the right architecture – with CPUs and GPUs working together to move AI from answers to action.
Below: The AI system in the future will look like a distributed system.

Not a subscriber yet?