Markets Happy Hour Podcast - October 8, 2026 - There’s No Limit

In this week's Markets Happy Hour Podcast we pledge to go jargon free - after I was caught out using the jargon "K shaped recovery" on BBC business news on Wednesday morning. Lesson learned! This week, which comes to you from Amsterdam (with some bad conference room lighting) we discuss the heightened inflation expectations, which are still paired with strong spending - creating a bit of a disconnect. We ask about whether that suggests the classic "K shaped recovery" is unraveling - that the lower end consumer is getting some "legs" and starting to spend more. We are unconvinced of that - given the fact that food prices remain high across the board - and could "poison" the well of future inflation. Energy too remains at high levels, so can interest rates possibly not follow inflation upwards?Digging into equity markets, earnings are growing in the S&P at 27%, undoubtedly powered by AI and we ask about how in fact these margins can possibly be expanding with rising costs and a more discerning consumer. We wonder if this is short term - have the costs been artificially suppressed and has the consumer pulled expenditure forward? The start of the AI cycle really killed the trajectories of both value stocks and small cap stocks, and there has been no repeat of the rotation and mean reversion that has typically presented in these cases. A sector that has languished in equity markets and is acutely exposed to interest rates is real estate, and from residential housing bearing the weight of 7% mortgages to commercial property caught off-guard by rising rates, there seems to be few places to hide in real estate investing today - except, perhaps, in SF houses or data centers. For investment portfolios public equities remain the buoyancy that has kept the portfolios afloat as rising bond yields have eroded fixed income return and real estate remains stagnant. While we have heard some anecdotal evidence of private equity returns and distributions slowly, behind the scenes, improving, any portfolio that is underweight public equities will lag its benchmark. Whether this matters is another question - most investors target steady state absolute returns, but it does remain to be seen if shifts will take place in these targets as equities dominate the headlines and steal an increasing share of the pie.