Bonds, ballots, and the Elephant in the Room

AI-related fragility has returned, driven by financing concerns and leveraged neocloud companies. Yet strong hyperscaler balance sheets and recurring market rotations suggest it remains premature to call an inflection point.

Fiscal debates focus on debt and deficits, but government size may matter more. While debt shows little link to bond yields, higher taxes and spending can affect competitiveness, growth and economic efficiency.

And so, the mantle of political instability passes from the UK to Europe. Spain is heading for a snap election after Pedro Sánchez called an early vote, but it is France which continues to steal the show.

Persistent geopolitical tensions continue to shape the outlook, but resilient global growth and strong corporate earnings are helping markets absorb higher interest rates.

As markets enter the final quarter of the year, investors have plenty to digest. Growth remains surprisingly resilient, even as energy prices rise, bond yields climb and inflation risks linger.

Markets have had plenty to digest over the summer. Yet they remain remarkably resilient.