Global Credit Bullets | Monday, 2 November 2026

Risk assets are becoming more vulnerable as political, monetary and geopolitical risks rise, favouring caution on credit and equities and a more constructive stance on duration.

• US midterm prediction markets price a 70% probability of a Democratic sweep, while Brent reached $118 per barrel last week amid potential escalation with Iran.
• The Federal Reserve kept rates unchanged, and although a December hike remains the base case, Chair Warsh’s dovish comments leave open the possibility of a skip.
• The ECB also held rates and sounded dovish, with Lagarde citing limited second-round inflation effects and growth risks; her departure is scheduled for 7 February, with De Cos and Knot viewed as leading successors.
• The Nasdaq is down more than 10% from its peak, some individual stocks have fallen 25%, and low-quality and distressed credit names have suffered heavy losses in 2026.
• Brazilian markets fell sharply after Lula’s re-election: the currency lost 10%, equities dropped 30% and local bond yields widened by 300 basis points, although pragmatic policymaking could make current levels attractive to long-term investors.

Takeaway: Algebris remains cautious on credit and equities but favours duration, while noting that the outlook depends on the Fed’s December decision, US election outcomes, Iran and the policy signals from Lula’s government.