'There Could Be' More Pain To Come As Debt Costs Soar

Global bond markets face continued upward pressure on yields, with the U.S. 10-year Treasury potentially settling between 5% and 5.25% due to resilient nominal growth, persistent inflation, and heavy issuance for AI infrastructure. While rising rates create "indigestion" for equities, corporate earnings stability should allow markets to overcome this "wall of worry." In Europe, the fiscal squeeze intensifies as governments balance rising debt interest costs against essential capital expenditure for national security, defense, and energy transition. Despite these pressures, European fixed income presents growing opportunities, even as the region remains less preferred for equities compared to the U.S. The broader investment landscape is currently defined by a "capex super cycle" where AI-driven growth and cybersecurity risks necessitate a diversified strategic allocation—utilizing equities for growth, fixed income for ballast, and gold or infrastructure to hedge against fiscal deficits and inflation.