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White papersRisk assets face off with rising global bond yields
The recent interest rate turmoil has driven long‑dated government bond yields to notable historical extremes, with U.S. 30-year yields hitting their highest level since 2007, 30-year JGBs since their introduction in 1999, UK gilts since 1997, and German bunds since 2011. Yet, simultaneously, equities have absorbed the rise in yields without too much damage, supported by a strong earnings environment. That resilience should not be taken for granted, however, as the balance of risks is becoming increasingly finely poised.
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White papersRising global bond yields: The test for risk assets
Global bond markets have sold off sharply in recent weeks, pushing long-end yields to multi-decade highs across major markets. U.S. 30-year yields hit their highest level since 2007, 30-year JGBs since their introduction in 1999, UK gilts since 1997, and German bunds since 2011.
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White papersWarsh appointment: Inflation sets the early agenda
Kevin Warsh’s tenure as Federal Reserve chair begins amid heightened market scrutiny as investors grapple with renewed inflationary pressure. Stronger‑than‑expected April CPI reinforces the case for patience, even as the new chair has expressed comfort looking through one‑off price pressures. However, the Fed’s consensus decision‑making structure and the drift of core inflation away from target both suggest policymakers may hold off on cuts and keep policy unchanged longer than anticipated. For investors, the risk is rising that it will be 2027 before they see any further policy easing from the Fed.
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White papersPositive surprise: Recognizing change before consensus
A positive surprise occurs when a company delivers results or provides signals that meaningfully exceed consensus expectations, thereby raising the market’s view of its sustainable growth rate. In small-cap growth, where valuations are largely driven by long-term growth assumptions embedded in discounted cash flow valuation models, such surprises can have an outsized impact on both earnings expectations and valuations.
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White papersCoping with market downturns
The market environment has shifted repeatedly over the past year, driven by a combination of policy uncertainty, geopolitical developments, and changing financial conditions. Beginning in April 2025, amid heightened trade tensions, markets experienced notable volatility before settling into relatively calmer conditions after the U.S. Supreme Court overturned key elements of the administration’s tariff framework. While this uncertainty left investors uneasy during the initial weeks of Trump’s second administration, sentiment gradually improved as markets stabilized through the first two months of 2026.
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White papersApril CPI report: Fed easing is becoming increasingly unlikely in 2026
After an extended period of cooling inflation, the impact of the Middle East conflict is driving a reacceleration in prices. Headline inflation rose 0.6% in April, lifting the annual rate to 3.8% and approaching a three-year high. Similar to March, energy was the largest contributor, accounting for over 40% of the increase. The more notable development in today’s report, however, was the upside surprise in core inflation, which excludes food and energy.
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White papersPrincipal Well-Being Index: Optimism among businesses in short supply
Macro uncertainty amid a series of shocks has led to a decline in confidence in both the business and broader economic outlook. Moreover, despite limited direct global exposure, these shocks have made small businesses grapple with the same macro pressures long faced by larger firms. Helping buffer these concerns, however, are relatively resilient underlying fundamentals, which should reduce the risk that these anxieties translate into broader economic weakness.
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White papersApril jobs report: Solid gains support a Fed holding pattern
The April employment report showed a significantly stronger-than-expected 115,000 gain in payrolls. This was bolstered by a positive revision to last month’s even stronger gain. Strong payrolls and a still-low unemployment rate demonstrate the labor market’s resilience despite the ongoing energy shock, easing concerns about recessionary conditions. Moreover, with wages trending lower, the risk of an inflationary spiral remains low, providing the Fed with some breathing room.
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White papersMarkets rebound as geopolitical shocks follow a familiar script
Global equity markets have staged a sharp rebound in recent weeks, delivering their strongest monthly performance in several years. The S&P 500 rose 10.5% in total return terms in April, its best month since November 2020. Additionally, despite persistent pessimism around Europe, the Stoxx 600 gained almost 6%, its strongest month since January 2025, while the MSCI Emerging Markets Index soared 15%, its best performance since November 2022.
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White papersApril ECB meeting: In a good position to make the right decision
As expected, the European Central Bank (ECB) held policy rates steady today, extending its pause for a seventh straight meeting in the current easing cycle. Rates on the deposit facility, main refinancing operations, and the marginal lending facility remain at 2.00%, 2.15%, and 2.40%, respectively.
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White papersConsumer delinquencies pose limited risks to financial stability
The conflict in the Middle East has triggered a renewed surge in gasoline prices, adding pressure to U.S. consumers already facing the highest credit delinquency rates since the Global Financial Crisis. Combined with a steady rise in consumer credit stress, these developments have heightened concerns that systemic financial vulnerabilities may be emerging, particularly in securitized credit markets. Investor worries have been further heightened by recent high-profile bankruptcies, including U.K. lender MFS in February, and First Brands and Tricolor in 2025.
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White papersGlobal market perspectives 2Q 2026: Hope for the best, ready for the worst
Our quarterly investment outlook highlights the themes and investment implications for the period ahead.
