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This edition of the House View is already the last of 2026 and, our attention will soon turn to the year ahead. But let us not rush things; November contains its share of important events. Over recent weeks, markets have continued to send a message that deserves investor’s full attention. Beneath the daily fluctuations of stock indices or the debates on upcoming central bank deci-sions, a more fundamental development is emerging: the underlying cost of capital has risen.

For more than a decade, investors operated in an exceptional environment. Very low interest rates, sometimes even negative, helped reduce the cost of financing to historically unprecedented levels. In such a context, time seemed to work in favour of almost all financial assets. Governments could finance significant deficits at low cost, companies borrowed extensively to invest or buy back their shares, and financial asset valuations benefited from a strong premium given to future growth.

This period now seems to belong to the past. Certainly, inflation has fallen well below the peaks observed after the pandemic, but long-term bond yields remain significantly higher than those investors had become accustomed to. More importantly, markets seem to accept the idea that this situation could persist.

The development reflects several underlying trends. Investment needs are increasing simultaneously in many areas: energy infrastructure, artificial intelli-gence (AI), industrial reshoring, defence, and climate adaptation. At the same time, public finances in many developed economies remain under pressure. The combination of significant financing needs and an abundant supply of public debt naturally contribute to upward pressure on the cost of capital.

That change deserves to be emphasised because it alters the way investors assess opportunities. When the cost of capital is low, the difference between an excellent project and a merely acceptable one tends to fade. When the cost of financing rises, selec-tivity becomes an essential virtue again. Investors place greater importance on productivity, cash-flow generation, balance sheet quality, and the visibility of growth prospects. It is precisely in this context that the two topics we have chosen to highlight in this edition are set.

The first topic, the subject of our Focus article (page 8), concerns India. In a world where capital costs more, economies able to efficiently convert investment into growth become particularly attractive. Thanks to a favourable demographic, a dynamic private sector, massive infrastructure investments, and increased integration in global value chains, India currently appears as one of the few large economies whose structural growth potential continues to enjoy broad consensus.

The second topic, our Market Views article (page 10), relates to the rise in long-term bond yields. Beyond short-term market movements, this increase reflects a revaluation of the price of savings and risk. It also recalls that bonds are gradually regaining a role they had partly lost during the years of extremely low rates: that of offering a significant real return to patient investors. Understanding the causes of this develop-ment is essential to grasp the prospects of different asset classes over the coming years.

These two phenomena tell the same story: that of a world where financial resources are no longer consid-ered unlimited and where investors must once again arbitrate between the various possible uses of capital. This regained discipline is not necessarily bad news. Periods when capital is correctly valued often favour better resource allocation and allow clearer distinc-tion between structural winners and beneficiaries of an exceptional monetary environment. For long-term investors, the challenge is therefore not to regret yesterday’s world but to adapt to the one taking shape.
At the dawn of 2027, one conviction prevails: markets will likely be increasingly guided by that of growth quality. When the cost of capital rises, sustainable value creation becomes the ultimate criterion. This is undoubtedly one of the very important transformations of our investment era.

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