The Cycle Refuses to Die as France Shakes Markets

Markets have heard recession calls for years, yet the expansion stubbornly persists, and Steno argues this persistence exposes a fake business cycle misreading at the heart of macro commentary. The picture is confirmed by confluenceinvestment.com data, because the Diffusion Index stayed in expansion territory for a 19th straight month in August 2026, with AI infrastructure spending and resilient consumers leading the advance.

The framework of the debate is drawn by morganstanley.com analysis, where optimists expect an early cycle reacceleration with broad equity gains in 2026 while pessimists point to a late cycle grind with narrower AI led returns. A bull market stretching into a fourth year, backed by monetary support and generative AI capex , forms the common ground both camps accept.

The oddity is documented by richmondfed.org research, as unemployment crept higher for 33 months from April 2023 to December 2025 without a recession, the longest such stretch on record. The note by Claudia Macaluso treats rising unemployment dynamics alongside strong GDP growth as the most unusual feature of the current episode.

US Cycle: Mid-Cycle or Late-Cycle

Tension on the French front is relayed by axios.com coverage, where Brookings scholar Robin Brooks argues that bond yields are spiraling out of control and contagion risk is spreading across highly indebted Europe. The October 5 2026 report by Emily Peck stresses that a debt crisis and social unrest are climbing together ahead of next year presidential vote.

The picture gains hard numbers from fortune.com reporting, with the five year CDS up to 81 basis points and the 10 year OAT yield at 4.989 percent, its highest level since 2002. According to Macquarie strategist Thierry Wizman, the OAT Bund spread reached 152 basis points and reflects higher sovereign default risk.

A matching snapshot comes from tradingeconomics.com data, placing the 10 year OAT at 4.92 percent, a peak unseen since July 2002, with the premium over German Bunds at its widest since 2011. The report highlights the tension between a deficit target near 5 percent and a public debt load approaching 120 percent of GDP.

France: OAT Shock and Budget Strain

The fiscal side is clarified by ccomptes.fr analysis, as the audit court finds the 2025 deficit reduction modest and driven mainly by tax increases worth about 23 billion Euros. Nominal GDP growth fell short of forecasts despite economic resilience, so fiscal consolidation still leans on revenue rather than spending discipline.

The theoretical frame for currencies is explained by wikipedia.org material, where purchasing power parity compares absolute buying power through a basket of around 3000 goods and services. The same framework recalls that tariffs and transaction costs can keep market rates away from that benchmark for long stretches.

PPP, Fed and Dollar: Where Rates Point

The policy frame is supplied by federalreserve.gov material, with the July 10 2026 Monetary Policy Report summarizing longer run goals and financial developments for Congress in systematic form. The dollar angle is completed by fxstreet.com analysis, where DBS economist Philip Wee notes the three week dollar rally is losing monetary support as expectations for consecutive hikes at the October 28 FOMC meeting fade.

Steno core thesis is summarized by stenoresearch.com writing, arguing the fake business cycle keeps surprising markets and central banks while cyclical gauges such as ISM Manufacturing grow less relevant for the whole economy. The sequel arrives via andreassteno.substack.com newsletter, where Steno writes that fading recession fear worked well since April 2020 and a contrarian bet on a liquidity cycle rebound looks attractive as fear returns.