The Algebris Podcast

The key variable for markets is the duration of the conflict between the US, Israel and Iran. A short conflict would likely result in only temporary oil price volatility, allowing markets to return to previous levels. However, a prolonged disruption could impact the Gulf region, which represents roughly 20% of global oil supply, potentially creating a physical deficit and triggering stagflation through lower growth and higher inflation. Markets have reacted quickly, but the moves so far remain relatively limited, suggesting further downside risk for risky assets. With investor positioning still very long after a strong two-year rally, the current shock may represent the early phase of a broader period of volatility.

The central macro message from the 2026 World Economic Forum in Davos is that the US may be moving away from the post-war order, forcing other nations to reinvest in defence and economic resilience.

Global growth remains strong, supported by large fiscal deficits, but that also keeps the door open to a resurgence of inflation. AI-led capex is significant and may be outpacing the realistic revenue opportunity by 2030, which could challenge current market pricing. Investors are also leaning further into global diversification, especially given a more unpredictable US policy backdrop and expectations for a weaker dollar.

We favour financials on yield-curve dynamics and operational leverage from early AI adoption, and we see gold as increasingly supported by central-bank demand and the search for politically independent reserves.

Listen to Davide Serra's notes from the World Economic Forum 2026.

Over the last few months the global economy has held up thanks to strong U.S. fiscal stimulus and widespread deficits elsewhere, but for the first time public debt worldwide is around 100% of global GDP, reducing governments’ room to respond to future shocks.

Nearly all asset classes look expensive and U.S. rate cuts are already priced in; moreover, Washington appears to be overstimulating the economy, partly with an eye on next year’s midterm elections.

There is also exuberance around AI: to justify current valuations, roughly $2 trillion of additional revenues would be needed by 2030—an implausibly large figure compared with the current revenues of the “Magnificent Seven.”

This and other takeaways in Davide Serra's (Founder and CEO, Algebris Investments) latest analysis.

Markets have adapted to a new, less orthodox economic order, supported by expansionary fiscal policies and more accommodative central banks. Artificial intelligence is seen as the main driver of growth, although for now its impact remains more perceived than real.
On the geopolitical front, the Middle East appears more stable, while challenges between the United States, Russia and China remain unresolved. In Europe, initial enthusiasm for German fiscal policy has waned, with growth still weak.

In the latest Algebris podcast, Gabriele Foà (Global Credit Portfolio Manager) – interviewed by Douglas Branson (Head of Business Development UK) – highlights the fiscal deterioration of advanced countries and predicts an era of “financial repression”, in which government yields will remain close to inflation. In this context, credit offers interesting opportunities, provided a selective approach is taken.

(Episode recorded on 29th October 2025)