Despite expectations of a slowdown, the global economy shows surprising strength, partly fueled by massive AI investments. However, sustained high oil prices are pushing inflation higher, forcing central banks like the Fed and ECB to maintain a restrictive monetary policy stance.
The conflict between Israel and Hezbollah is intensifying, with Israel actively clearing border areas but facing new threats from advanced, low-tech drones. The situation is complicated by internal Israeli politics, including an upcoming election and debates over the effectiveness of military actions against Iran and its proxies.
Strategists believe the market has entered a new era of structurally higher interest rates, as the factors that previously suppressed yields (low/stable inflation, QE) have reversed. While short-term yields are attractive, there's a risk that long-term yields could rise further, with the 10-year Treasury potentially reaching 5%.
Central banks globally are under pressure to be more restrictive than previously anticipated. While the ECB is expected to hike, there are fears it might be too aggressive for Europe's weaker economy, whereas the Fed is likely to hold steady but with a clear hawkish bias due to US economic strength.
Keep pulling the thread on Israel Trade Missiles.