Asian/European Markets

Global equity markets moved modestly higher this week as first-quarter earnings season continued to deliver strong results.

Despite these higher costs, a projected 45 million Americans are expected to travel at least 50 miles from home this weekend, setting a new record. Close to 40 million will drive while some 3.7 million will fly.

Last Friday closed with the 10-year Treasury yield at 4.60%, a one-year high, and the doom commentary about rising interest rates was waiting before the bell even rang. Hyperinflation. Bond market breakdown. Paradigm shift. A 1981 fair-value retest.

Since the post-COVID recovery began, U.S. nonfinancial corporations have generally managed capital conservatively. They have kept credit metrics stable and, in many cases, actively improved them. That discipline was not entirely voluntary: The sharp adjustment in funding costs triggered by the Federal Reserve’s 2022–2023 rate hiking cycle raised the bar for incremental borrowing and pushed management teams toward balance sheet restraint.

I have often written about one of the few indicators in economics that has earned its reputation over the years, and for good reason. It has preceded virtually every US recession since World War II. I’m talking about the inverted yield curve.

In this second quarter update, Western Asset believes global fixed-income markets face a more complex backdrop as geopolitics, rapid AI adoption and private credit scrutiny intersect.

For private equity firms, capital flexibility is prized today. Merger-and-acquisition (M&A) activity has cooled, while commodity prices and artificial intelligence (AI)-driven disruption have heated up, creating uncertainty for investors. This makes it more challenging to sell portfolio companies, so private equity firms are holding investments longer. As a result, many firms are turning to net asset value (NAV) loans for capital needs.

Global bond yields are reaching frightening levels due to the continued war in Iran and the effective closure of the Strait of Hormuz. Continued high oil prices and the threat of reverberating inflation are causing investors to demand higher yields on government bonds.

Stocks’ rally off the March 30 lows has been nothing short of wild, with internal market dynamics showing some performance divergences that we haven’t seen for decades. For example, in the first 6 weeks of the rally, the S&P 500 Growth index beat the S&P 500 Low Volatility Index by more than any other 6-week window on record.

Emerging markets (EM) are using low-cost renewables to cut fuel imports, stabilize power costs and improve energy security—positioning EM as the growth engine of the energy transition. Countries and companies that leverage their dominance in critical minerals and green technology could pull ahead, creating dispersion in potential outcomes for investors.

In the past year, new models from industry leaders have continued to boost AI’s capabilities. According to various capabilities tests, Anthropic’s Mythos model has leapfrogged other AI models – including in the ability to thwart or support cyberattacks.

It’s human nature to allow familiar patterns to guide our decision-making processes. But it’s just as important to recognize when changing conditions warrant a rethink. Return patterns in global equity markets appear to be shifting in ways that should prompt investors to revisit their allocations.

Inflation surged higher in April, with the Consumer Price Index (CPI) jumping 3.8 per cent from 3.3 per cent in March and the Producer Price Index (PPI) up six per cent from four per cent in March. The increase in the CPI owed much to energy and food prices.

Alex Evangeli has traded ETF products since 2007. He founded and led the fixed income trading business at Virtu Financial in Europe before relocating to New York to trade and lead the development of fixed income trading technology for the ETF block business.

The rapid deployment of artificial intelligence (AI) is evident; 99% of CEOs say their companies are investing in the technology. Apparently, AI is also quick at garnering assets. Launched less than three months ago, the Pictet AI Enhanced US Equity ETF (PQUS) is already approaching the $100 million mark in assets under management (AUM).

Although a lot has changed since our last quarterly, its central theme – dispersion – feels like it’s only become more pronounced. We wrote last time that ‘‘we believe we’re entering a new era of dispersion in the performance of financial assets.’’

Nineteenth-century oil processing plants used simple, column distillation of crude oil to produce kerosene, which was in high demand for lighting lamps. The process also yielded a dangerously flammable byproduct called gasoline which had no obvious use.

Chris Galipeau discusses high-conviction insights that go beyond media headlines.

Markets ended last week under pressure as the optimism that had been building around a potential geopolitical breakthrough faded quickly. The China summit did not deliver the progress that had been hoped for. The Boeing aircraft order was smaller than expected; there was no meaningful movement on Iran; the Taiwan issue was brought forward in a way that unsettled markets; and the hoped-for easing of tensions around the Strait of Hormuz did not materialize.

Emerging market debt is compelling as a medium‑term structural allocation, particularly for investors seeking to diversify away from concentrated U.S. exposures.

If Donald Trump and Xi Jinping's Beijing summit produces a sustained Sino-American trade truce and a path to reopening the Strait of Hormuz, that will give the world economy something it has lacked for the past year and half: a reduction in tail risks. In a year when so much has gone wrong, that is a welcome prospect.

I’ve long been a student of game theory, the branch of mathematics that studies how rational actors make decisions when their outcomes depend on what everyone else does. It’s a helpful framework for understanding markets and geopolitics, and right now, there’s no better place to apply it than Taiwan.

A frequently asked question in recent weeks is whether the market is simply ignoring the risks stemming from the current geopolitical conflict, especially given the spike in oil prices that has pushed inflation pressures higher.

AI has moved from buzzword to business reality. For Advisors and RIAs, the question is no longer whether AI will matter. It’s how fast your practice can use it to remove friction, improve service, and stay focused on the work clients actually value.

The summit in Beijing between US President Donald Trump and Chinese President Xi Jinping delivered little in the way of diplomatic breakthroughs but bears important cross-asset implications.

The stagflation narrative dominating financial social media isn’t completely wrong. That’s what makes it so dangerous. After more than 30 years of managing client portfolios through actual inflationary cycles, not watching them on YouTube, I’ve learned that the most damaging investment advice isn’t built on outright lies.

U.S. inflation and rates remain elevated. Credit markets continue to show resilience. Opportunities are emerging across securitized and high yield assets

First quarter 2026 earnings were stronger than expected and we think that there might be continued strength in the second quarter, unless there is a major macro shift.

Yes, this time is different, but not because inflation itself is unprecedented. What has fundamentally changed is the macroeconomic starting point. Unlike the post-Global Financial Crisis period, when persistent disinflation and repeated downside surprises dominated policy decisions, the economy today is operating in a world where structural disinflation is no longer the default backdrop.

With tensions simmering in the Middle East and the global economy feeling the pinch of high energy prices, high-yield bonds might not be on every investor’s radar. In our view, they should be.

ClearBridge Investments: The ongoing energy crisis is pushing global oil inventories, including many critical product inventories, toward all-time lows, and it may be time to position portfolios given the potential for supply shortages to emerge.

Explore how Women in ETFs & CFAOC experts believe AI will supplement, not replace, financial professionals.

AI is surely the zeitgeist at industry conferences across sectors right now. Emerging technology, increased efficiency, and scalability are all talking points. But so too are headcount reductions, reduced tech-sector free cash flow, and growing worries about a 1990s-like bubble.

Investing in emerging markets (EM) used to be synonymous with getting exposure to China. It’s an ideal notion, given that it’s the second largest economy and thus commands a heavy weight in standard EM benchmarks. Challenging that narrative today is a changing geopolitical landscape, which continues as U.S. president Donald Trump visits China in a high-stakes meeting between the two economic superpowers.

Silver may help efficiently produce hydrogen for use as a power source. Not only is hydrogen clean-burning – leaving only water – but it is easier to store and transport than petroleum-based fuels. Conventional methods of producing hydrogen, such as steam methane reforming (SMR) or water electrolysis, have disadvantages that silver may help to overcome.

Stock markets have been hitting all-time highs and credit spreads remain low, yet higher interest rates and mounting floating-rate debt are straining lower-rated borrowers. This tension is surfacing first in leveraged loans as “quiet defaults” become more common — opening up a dynamic set of opportunities for investors specialized in stressed and distressed assets.

It’s likely not a bubble. Earnings are high. Prices are high because they anticipate future high earnings growth. The historical record shows that growth rate is achievable.

April delivered a constructive backdrop for preferred securities, with the ICE BofA Fixed-Rate Preferred Securities Index rebounding 2.23% and bringing YTD returns back into positive territory at 0.8%.

Artificial intelligence (AI) leadership is no longer a developed-market monopoly. Emerging markets (EM) now have their own AI champions, and productivity gains may follow. For bond investors, we expect the implications to differ by country—driven by industry composition, capital intensity, digital infrastructure and speed to adoption.

Our reading is that this is a meaningful positive at the surface — a real-time confirmation that the most pessimistic recession scripts written in March can be set aside — but it is also a print that fails to alter the structural calculus we have been describing all year. The labor market is steady. The trajectory of fiscal policy, monetary credibility, and dollar reserve status is not.

Kevin Warsh set to be confirmed as the next Fed chair, Senate committee meets to consider the CLARITY Act, President Trump heads to China, and the gerrymandering wars heat up.

Get ready each week with high-conviction insights that go beyond media headlines.

Emerging market stocks have rebounded to new highs following their correction at the onset of the Iran war. The recent rally has been concentrated around AI. Can this continue?