The Daily Spark

Aggregate M&A volume figures are misleading, a handful of blockbuster deals are dominating the headline numbers.

For the first time, foreign private investors hold more US Treasuries than foreign central banks, see chart below. This is a structural shift that makes the Treasury market increasingly sensitive to the return expectations of price-sensitive private capital.

Periods of higher inflation are associated with weaker returns in the S&P 500 and the IG and HY indexes, consistent with a policy backdrop of elevated interest rates that restrain risk-taking, see chart below.

Splitting the weekly business formation data into industries with high AI adoption rates and low AI adoption rates shows that the sectors leaning into AI are pulling ahead in new firm creation, see chart below.

The global oil market runs through a few critical arteries, see chart below. From Hormuz to Malacca, disruption at any one point can ripple worldwide, underscoring Edward Fishman’s Chokepoints thesis that geopolitical influence lies in controlling flows, not just resources, see also here.

Younger investors may trade more, but older households continue to accumulate more wealth, see chart below.

In 2024, former ECB president and Italian prime minister Mario Draghi laid out 383 policy recommendations to make the European economy more competitive, and so far, only 10% of his proposals have been implemented, see chart below.

Growth is weak in Europe, and European politicians need to move much faster if they want to make the European economy more competitive.

A liability management exercise (LME) is when a borrower restructures existing debt to improve their financial position, typically by extending maturities, reducing interest costs or avoiding default.

As the Fed began raising rates in 2022, LMEs increased as companies faced higher borrowing costs, see chart below.

That trend is now reversing. Over the past nine months, LMEs have declined.

The bottom line is that there are no signs of a full-blown credit cycle, and the economy remains resilient, supported by the AI boom and the One Big Beautiful Bill.

Hedge funds own a record-high 8% of US Treasuries, and with combined repo and prime brokerage borrowing exceeding $6 trillion, any forced unwind of these leveraged positions could send shockwaves through global fixed income markets. For more, see bullet point number 5 here.

Breaking down business applications into value and growth companies reveals a widening divergence, likely driven by the proliferation of AI-enabled startups, as large language models dramatically lower the barriers to entrepreneurship. For more, see also here.