Daily Commentary

MarketMinder’s View: First, this article dives into politics in France, so please note we favor no politician nor any political party, assessing matters solely for their potential effects on markets and the economy. As this piece points out, France’s 10-year bond yield has hit its highest level since 2008 and spreads against Germany hit levels seen during the eurozone sovereign debt crisis as, “Investors have warned about a ‘nightmare scenario’ for France’s public finances in the event of a run-off between National Rally’s Ms Le Pen and hard-Left firebrand Jean-Luc Mélenchon. France’s public debt exceeds 116pc of GDP, and concerns remain that it will rise as polling shows National Rally’s Ms Le Pen leading the race to succeed Emmanuel Macron.” Concerns around Le Pen stem chiefly from her plan to reject most austerity measures and potentially blow out the budget deficit. Mélenchon has fanned fear by suggest he will subject French debt to the guillotine, taking about 18% of French OATs owned by the government itself and just cancelling them. This all sounds very scary, but let us dive a bit deeper to add critical context. First, anchoring a number to 2008 evokes fear because of the global financial crisis, but a look at history implies there is nothing special about a 4% French 10-year bond yield (and French sovereign debt wasn’t part of the 2008 story). Per FactSet, French 10-year yields exceeded 4% for most of the late 1990s and early 2000s—yet those weren’t disastrous times for the French economy or markets. That 10-year French debt yields were below 4% for most of the past 15 years is in line with the low-rate environment by historical standards globally (see the US for more). Second, on spreads: Yes, French 10-year yields are about 0.86 percentage point above Germany’s, a spread seen from October 2011 through July 2012 (data from FactSet). Yet it was also at or above this mark at points in 2024 and 2025. Here is the key: In neither case did a French debt calamity ensue. The eurozone debt crisis was about Greece, Portugal, Ireland and to a lesser extent, Spain and Italy. Those spreads were FAR higher than this. Last, it is a stretch at this juncture to proclaim either Le Pen or Mélenchon will be the next French president. The presidential election is set for April 18, 2027. A lot can change between now and then, and when you consider the long, long history of politicians’ cooling down their rhetoric once they enter power, we caution investors against presuming France is on the verge of a financial crisis should either of the supposedly “nightmare” candidates enter power next year. This is doubly true for France, considering how fractured Le Pen’s party is on economic policy. For more, see our July commentary, “Long-Term Forecasts and Court Verdicts: The Latest in British and French Politics.”

MarketMinder’s View: Please note, MarketMinder is nonpartisan and doesn’t prefer one politician or political party over another. Our interest is with politics’ economic, market and personal finance implications only. As always, we advise taking politicians’ words with many grains of salt, and UK Prime Minister Andy Burnham is no exception. However, we did find the rhetoric shared here interesting. For all the presumptions of a “leftward lurch” after Burnham replaced former Prime Minister Keir Starmer, reality has so far been rather benign. With many businesses allegedly worried that Chancellor John Healey’s October Budget will introduce big tax hikes, “Burnham said he was aware such speculation could chill investment and that he had therefore decided to hold the Budget ‘at the earliest date we realistically could have done’ in October—a month earlier than Rachel Reeves’ Budget last year. He is expected to make cutting the cost of business one of his themes in a statement to MPs when the House of Commons returns from its summer break next Tuesday, with improvements to energy-grid connectivity a key policy. … Burnham also insisted his plan for more public control over key industries would not mean a wholesale state takeover of utilities, as he and his ministers ponder what to do with financially stricken Thames Water.” Mind you, we aren’t cheering these pledges—talk is cheap. But for all the handwringing over a Burnham premiership imposing “anti-market” policies, the PM is behaving like a regular politician in toning down extreme-sounding campaign rhetoric—evidence that fearful expectations may very well have overrun reality. We shall see when the Budget itself drops, but there has long been a habit among investors to buy political narratives and personalities in Britain that outkicks what these people can actually achieve once in office. It won’t surprise us if the “leftward lurch” is the latest theory that proves overheated hype.

MarketMinder’s View: If you want an illustrative example about the squishiness of polls, see the special Jackson Hole edition of the CNBC Fed Survey featured here. Among 31 respondents, which include economists, strategists and investors, 80% (or around 25 people) think Fed Chair Kevin Warsh should provide more insight about his economic views—yet there is no consensus (48% to 48%) about whether the Fed head should share his rate outlook. So most respondents want Warsh’s opinion about the economy (which the Fed has little influence on), yet they are mixed on his interest rate views (an area where the Fed can at least have a modicum of influence)? To add to the inconsistency, “Yet, 65% of respondents agree with Warsh that the Fed would benefit from talking less and getting a more unfiltered view of market signals on where rate policy should be.” We are confused—so central bank observers want more Warsh analysis about GDP and inflation yet they also think the Fed should talk less? Folks, this is why investors need to take all this speculation about what the Fed will or won’t do with a grain of salt—the noise conflicts and contradicts, as commentators themselves don’t know what they want. The chatter can fill headlines on a slow news day, but it won’t reveal future Fed actions. Focus on what central bankers do, not what they do (or do not) say. For more, see our early-August commentary, “Digging Into Last Week’s Fed ‘Credibility’ Concerns.”