The global economy continues to demonstrate remarkable resilience despite a further deterioration in the geopolitical backdrop. In the United States, growth remains robust and even appears to be accelerating, supported notably by corporate investment in IT infrastructure and artificial intelligence. However, tighter monetary policies and rising bond yields are creating a more challenging environment for financial markets.
The global economy remains surprisingly resilient despite steadily intensifying geopolitical tensions. This resilience is particularly evident in the United States, where most indicators point to economic activity remaining strong, if not accelerating.
For now, concerns about a sharp slowdown have therefore failed to materialise, and US growth continues to exhibit favourable momentum. However, the expansion is becoming increasingly reliant on corporate investment.
Spending on IT infrastructure, data centres and the deployment of artificial intelligence has emerged as one of the main drivers of economic activity. The scale of this investment is supporting near-term growth and could also contribute to sustained productivity gains across the US economy.
This resilience is nevertheless unfolding against a backdrop of continued strains in energy markets. The blockade of the Strait of Hormuz and persistently high prices for refined products continue to fuel inflation risks.
Faced with this situation, major central banks have been compelled to tighten monetary policy in order to prevent a renewed surge in inflation and preserve their credibility.
This shift in policy has intensified pressure on bond markets. Yields have continued to rise worldwide, reaching levels not seen in more than two decades in several countries.
This trend is particularly evident in the United States, where the yield on 10-year US government bonds now exceeds 5%.
The rise in bond yields represents a significant change in the market environment. It comes at a time when the US economy continues to demonstrate resilience and inflationary pressures remain present.
Higher long-term interest rates, however, represent a growing risk for equity markets, with several indices trading close to their all-time highs.
Should these pressures persist, a higher cost of capital and increased competition from fixed-income investments could weigh on valuations.
Following the strong performance of equities, the expected risk-return trade-off therefore appears less favourable.
The current environment therefore reflects two distinct dynamics. On the one hand, the global economy continues to demonstrate resilience, supported notably by robust US economic activity and corporate investment. On the other, energy market tensions and inflationary pressures are contributing to tighter monetary policies and rising long-term interest rates.
Higher bond yields have consequently become an important feature of the market environment and are placing increasing pressure on risk assets.
Against this backdrop, the resilience of the global economy faces a new test: the prospect of persistently higher long-term interest rates.