Is a Sovereign Bond Market Riot Brewing?
No. Sovereign bond yields across developed markets are likely to stay higher for longer given the macro, monetary, and fiscal backdrop, but a sustained, disorderly rise in yields looks unlikely.
Europe
Review of Market Performance: Fiscal Year 2026
The commodity supply shock mildly slowed global growth, though the effects varied by region. Even so, global equities posted another strong fiscal year across a broad set of markets. The US dollar appreciated modestly, with the United States remaining relatively insulated from developments in the Middle East. Bond returns lagged as inflation pressures resurfaced, while real assets performed strongly as the supply shock intensified and demand tied to AI buildout continued to strengthen.
Starmer’s Resignation as UK PM Sees Focus Shift to Burnham’s Fiscal Stance
Keir Starmer’s resignation formalises a political transition that had already been widely anticipated after Labour’s poor local election results and months of pressure on his leadership.
UK Political Turmoil Adds Noise, But Gilts Will Remain Driven By Broader Macro Forces
Large losses in last weekend’s local elections have increased pressure on Labour Party leader and Prime Minister Keir Starmer. Frustration was already building within the Labour Party over the lack of visible progress on key priorities, compounded by weak approval ratings.
Will the Iran War Force the ECB and BOE to Tighten as Much as Markets Expect?
No, we do not think so. While the European Central Bank and Bank of England have adopted a more hawkish tone in response to the Iran-driven energy shock, we believe markets are overpricing the amount of tightening that will ultimately be delivered.
Germany’s Fiscal Boost Remains a Tailwind Despite Near-Term Risks
German equities entered 2025 with strong momentum, supported in part by a sharp shift in Germany’s fiscal outlook. After years of underinvestment, the government announced materially higher spending on infrastructure and defense. However, that momentum faded through 2025 into 2026, and German equities stalled.
Review of Market Performance: Calendar Year 2025
Global economic growth hovered near trend in 2025. The dollar weakened sharply, while global equities and commodities posted strong gains. Bond returns improved as rates and credit spreads eased.
VantagePoint: Electrifying Returns in the AI Era
In this edition of VantagePoint, we examine how the rise of AI is reshaping the global energy landscape and highlight the most compelling opportunities and risks for investors.
Review of Market Performance: Fiscal Year 2025
US tariffs added to market volatility in the fiscal year ended June 30, 2025. Nevertheless, most risk assets ended the year higher, supported by strong earnings ahead of tariff uncertainty and the prospect of continued central bank policy easing to support growth.
VantagePoint: What to Do About the US Dollar?
In this edition of VantagePoint, we examine the historical context of the dollar, outline why we believe the recent decline is likely part of a multi-year bear market, and discuss strategies investors can use to reduce their dollar exposure.