The interest rate cycle

By Carmel Crimmins, Reuters Econ World podcast host

Hello there,

The Fed met market expectations with its quarter-point rate cut but the future path of U.S. monetary policy is littered with uncertainty. The direction of travel everywhere else though is clear – the global interest rate cycle is turning, without the Fed leading the charge.

My colleague Mike Dolan digs into that bifurcation. It's not a full-blown hawkish turn – among the major central banks, only Japan is expected to hike anytime soon. But the turn away from cuts comes at a murky time for bond markets more broadly

It's getting murkier for stock markets too. Oracle has rained on the post-Fed market rally.  Its sales and profits miss and a $15 billion AI overspend have reignited fears about whether all the money being poured into data centers and chips will pay off. Markets will get a chance to reassess the AI financing debate when Broadcom reports after the close.

The AI boom and the Fed have propelled stocks forward this year, but could things get shakier in 2026? Stock index valuations are already expensive nearly everywhere relative to recent 15-year medians and company borrowing for everything from artificial-intelligence investment to a wave of mergers and acquisitions is expected to move up a gear.

A SpaceX IPO could be a big mood-booster for investors. Elon Musk's rocket maker is looking to raise more than $25 billion through an initial public offering in 2026, a move that could boost its valuation to over $1 trillion, according to a person familiar with the matter.

Even though it's a high-risk, capital-intensive business, demand from retail investors for any SpaceX listing is expected to be high. But a word of warning: richly valued stock market debutantes rarely deliver lasting gains. According to data from Jay Ritter, a University of Florida professor emeritus who researches IPOs, between 1980 and 2023, 45 companies went public with at least $100 million in inflation-adjusted revenue and valuations more than 40 times their annual sales on the first day of trading. Only seven were trading higher three years later.

Fed rate cuts are usually a mood-booster for stocks but the outlook for future cuts is heavily dependent on the health of the U.S. labor market. Right now, it looks like it's stuck in "no hire" limbo. We take a deep dive into the forces reshaping America's jobs market on this week's Reuters Econ World podcast. Listen here.

And finally, all that glitters right now is … silver. The white metal has been quietly outperforming gold, gaining 116% so far this year and hitting record highs. Fed rate cuts have helped, as have tight supplies. In fact, as Clyde Russell writes in a recent column, silver has a more compelling long-term outlook than gold given the surging demand from renewable technologies such as solar panels and limited scope to boost mined output.

As always, I'd love to hear from you by hitting reply on this email or finding me on LinkedIn.  

Big tech firms are turning aggressively to the debt markets in their race to build AI-ready data centers, a shift for Silicon Valley firms that typically relied on cash to fund their investments. The sudden pickup in public debt issuance has raised questions about the market's ability to absorb the surge in supply and is feeding into growing worries over AI-related spending

"Over the last couple of years of the Biden administration, almost all of the workforce growth and a lot of the job growth was among foreign-born new entrants to the workforce and job finders, not native-born Americans. That's completely switched in the 10 months since Donald Trump has returned to the White House. All of the jobs that we've seen created over the short term yet of his presidency have been - according to BLS data - have been from native born Americans. And in fact, about a million fewer foreign born people are employed and in the workforce now than were in January."

Dan Burns, Reuters U.S. economics editor, on this week's Reuters Econ World podcast.

On this week's show, we discuss the economic forces shaping the shady world of art theft. Listen here.

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