Growth vs. crisis: Markets weigh a higher-rate reality

Higher rates are signaling an economy adjusting between resilient growth and a possible slowdown, not an emerging debt crisis.

• Rising US Treasury yields can reflect either fiscal concerns or stronger productivity and investment linked to artificial intelligence.
• France’s government-bond spread versus Germany has widened sharply, but the dollar has remained firm and longer-term inflation expectations relatively contained.
• Credit markets show stress in the lowest-quality high-yield segment, while investment-grade spreads and higher-quality high-yield spreads remain relatively tight by historical standards.
• Higher rates and oil prices are pressuring cyclical sectors and financing-sensitive businesses, making a slowdown increasingly plausible as borrowing costs cool demand.
• Market leadership has shifted: the S&P 500 Equal Weight Index fell 3.58% since August 31, 2026, while the S&P 500 gained 1.63%; earlier, year-to-date performance favored the equal-weight index, up 15.57% versus 13.12% for the S&P 500.

Takeaway: The author sees a constructive backdrop for equities in either a strong-growth or slowing-growth scenario, but expects strong growth to favor cyclicals and broader market participation, while slower growth favors higher-quality and mega-cap growth companies.