Every cloud has a silver lining. After deluding themselves for over 50 years, Europeans seem to be discovering, to their horror, that they will have to provide for their own defense rather than rely on American aid via NATO. Interest-rate markets are tightening in the face of financing needs.
For once, let's start this column with the movements in European bond yields. Germany set the world alight by announcing a substantial increase in spending on its defense infrastructure, while specifying that this would not be taken into account when calculating debt. That was all it took to boost German 10-year yields by 30 basis points, back to their October 2023 level of around 3%, raising French and Italian bonds in their wake.
Meanwhile, the US created 151,000 jobs in February, slightly below an estimate of 159,000, although not enough to shake things up. As for Donald Trump, he seems to have softened his stance, by once again postponing the implementation of tariffs against Mexico and Canada. Despite all this, US equities, particularly growth stocks via the prism of the Nasdaq 100, continue to slide - many of you are wondering whether the market has entered a downtrend. At this stage, we should remain reasonable, however. As we pointed out in this very column last week, the sectoral rotation currently underway is the sign of a consolidation, whereas a global sell-off would be the sign of a bear market. In other words, keep your powder dry and be ready to (re)position yourself in growth stocks once the storm has passed.
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