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Nicholas Spiro

There is no shortage of reasons to worry about the outlook for the global economy and markets. On September 9, Brent crude, the international oil benchmark, surpassed US$100 a barrel in response to the intensification of hostilities in the Middle East.
Bank of America warned that a renewed escalation in the conflict between Iran and the United States would prove more damaging to a global economy which “would no longer have the oil inventories buffer as it had early in the year”.
Another threat is the recent surge in yields on long-term government bonds. The average yield on long-dated debt across the Group of 7 advanced economies has risen to its highest level since 2000, according to Bloomberg data. In the US, the yield on 10-year Treasury bonds is approaching the 5 per cent level beyond which higher yields start to hurt stocks.
These two threats add to the persistent uncertainty caused by US President Donald Trump’s reckless trade tariffs, which are designed to hurt America’s friends more than its foes. The onslaught of protectionism has damaged US alliances around the world and contributed to the erosion of confidence in US assets.


Yet despite all these risks, the global economy and markets have held up remarkably well. In fact, the most compelling narrative since the beginning of last year is not the succession of shocks but the unexpected resilience of growth and the strong performance of equity markets.
In a report on September 3, George Saravelos of Deutsche Bank noted that global economic data has beaten expectations for the longest period on record, excluding the 2009-10 liquidity-fuelled rebound from the 2008 global financial crisis.
Citigroup’s global economic surprise index, which shows whether economic data releases are beating or falling short of analysts’ expectations, is at its highest level since April 2023. According to a gauge of global manufacturing and services sector activity compiled by JPMorgan, output last month rose to a nearly 30-month high, reaching a level consistent with annual growth of 3.1 per cent.
Meanwhile, the MSCI All-Country World Index, which tracks global stocks, stands at an all-time high. JPMorgan notes that non-US equities are on track to outperform the US for the second straight year, underpinned by stronger growth in corporate earnings.

The findings of Bank of America’s latest global fund manager survey on August 18 showed that allocations to global stocks stood at their highest level since November 2021. Only 4 per cent of respondents expected a “hard landing” for the global economy, compared with 49 per cent just after Trump unveiled his sweeping “Liberation Day” tariffs in early April 2025.
While the optimism is excessive, it is not entirely misplaced. First, the artificial intelligence boom (AI) has been a counterweight to geopolitical shocks, spurring a dramatic increase in capital spending on digital infrastructure, boosting investment in the US and generating positive spillover effects across global supply chains, especially in Asia.
Moreover, Trump’s protectionist and nationalist policies have forced other big economies to become more self-sufficient. Investments in rearmament, critical goods production and new energy infrastructure have provided additional stimulus. Saravelos credited the resilience of growth to “a big, global capex cycle in AI (private capital) and a buildout of strategic autonomy (public capital) in defence, energy and supply chains.”




Second, although the energy shock has driven up consumer prices, inflation expectations have not become unmoored. Financial market measures of long-term inflation expectations are well-behaved. The five-year, five-year forward inflation break-even rate – a gauge of long-term inflation expectations – stands at 2.3 per cent, slightly above the US Federal Reserve’s 2 per cent target. “The Fed has not lost credibility in the bond market. At least not yet,” Barclays said.
Third, the reason for the rise in bond yields is as important as the rise itself. Although there is debate over the determinants of higher yields, stronger-than-expected growth and the consequent need for higher interest rates are undoubtedly key factors.
Furthermore, it is important to put things into perspective. While the benchmark 10-year Treasury yield is close to its highest level since 2007, this seems high only because central banks kept yields artificially low for more than a decade following the 2008 financial crisis. “The low rates that too many people had come to view as ‘normal’ were symptoms of deep social pathologies,” said Matthew Klein, publisher of The Overshoot newsletter.
Finally, Trump’s reckless policies have injected volatility into the US dollar and Treasury bonds, undermining their role as safe havens. Despite the succession of geopolitical shocks, the dollar has fallen, keeping global financial conditions looser than they would otherwise have been. This has contributed to the relative resilience of emerging markets.
While the global economy and markets face acute challenges, from the threat of a more severe and prolonged energy shock to a disorderly unwinding of the AI trade, their resilience has been underappreciated.


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Stocks

Why the global economy and markets continue to defy doomsayers

A woman walks in front of an electronic stock board showing Japan’s Nikkei and New York Dow stock indexes at a securities firm in Tokyo on September 9. Photo: AP

People stand near an electronic screen showing South Korea’s benchmark stock index at the Hana Bank headquarters in Seoul on July 31. Photo: AFP

Trump bans some Canadian goods, raises tariffs on others as trade war escalates

Canadian and US flags fly across the international border on the Gordie Howe International bridge that connects Windsor, Ontario,  and Detroit, Michigan. Photo: AFP

Canadian Prime Minister Mark Carney. Photo: TNS

Brent crude stares down the barrel of US$100 barrier as global frictions raise supply risk

The price of diesel is displayed at a petrol station in New York on Friday. The national average price of retail diesel hit a record high on Thursday as the cost of crude oil rebounded. Photo: Xinhua

As Bessent addresses G20 peers, analysts warn benchmark bond yields near ‘concern zone’

US Treasury Secretary Scott Bessent addresses a news conference on Tuesday after the G20 financial meetings in Asheville, North Carolina. Photo: AFP

G20 finance ministers and central bankers at Tuesday’s plenary session on sovereign debt in Asheville. Photo: AP

Opinion

World Opinion

Economy

Global Economy

Despite rising energy prices and bond yields, economic growth has been resilient and equity markets have been performing strongly


Despite rising energy prices and bond yields, economic growth has been resilient and equity markets have been performing strongly.


Bonds

United States

Macroscope

Middle East

George Saravelos

Donald Trump

Bank of America

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Column

Why the global economy and markets continue to defy doomsayers

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Despite rising energy prices and bond yields, economic growth has been resilient and equity markets have been performing strongly

Despite rising energy prices and bond yields, economic growth has been resilient and equity markets have been performing strongly