Commercial Awareness Update: May 12th 2026

Catch-up: Commercial Awareness Update (5th May) | Deep Dive: Interest Rates & Inflation (7th May)

For serious candidates: Career Guides | Breaking Into Banking

For extremely serious candidates: Finance Fast Track

Hey {{first_name}} 👋!

Hope your week has gotten off to a strong start.

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Now onto today’s issue.

A lot of students consume finance news every single day but still struggle when an interviewer asks: “What’s going on in markets right now?”

Because reading headlines and actually understanding markets are two very different things.

The goal of these updates isn’t to overwhelm you with information or throw random stories at you. It’s to help you understand the themes that are genuinely driving markets, finance, and investment banking activity right now so you can actually talk about them confidently in interviews.

Last week’s deep dive on interest rates and inflation got a really strong response, so this week we’re zooming back out and looking at the broader market picture again.

As always, don’t focus on memorising headlines.

Focus on understanding:

That’s what separates strong candidates from everyone else.

Cast your vote for Thursdays ‘Deep Dive’ topic in this poll:

I’ll take the top result and turn it into a full deep dive later this week.

With that, let’s get into todays Commercial Awareness Update!

Interest rates are still the biggest driver of markets right now, and over the past couple of weeks we’ve seen investors become less confident that central banks are going to cut rates aggressively anytime soon.

Earlier this year, markets were pricing in multiple cuts from central banks like the Federal Reserve and the Bank of England. But recent inflation data has reminded investors that inflation, especially in areas like wages and services, is still proving quite sticky.

That’s brought back the “higher for longer” narrative slightly. In simple terms, markets are starting to accept that rates may stay elevated for longer than people originally hoped.

You can see this through bond yields moving higher again recently. Bond yields basically reflect market expectations around interest rates and inflation. If investors think rates will stay high, yields tend to rise. And when yields rise, markets pay attention.

Why?

Because higher yields affect valuations across almost every asset class. Higher rates generally put pressure on equities, especially growth and tech stocks, because future profits become less valuable when borrowing costs remain elevated.

It also matters for finance more broadly. Higher rates tend to slow:

That’s why markets remain so obsessed with inflation reports and central bank commentary. Investors are constantly trying to work out whether rate cuts are genuinely getting closer or whether rates will stay restrictive for longer than expected.

From an interview perspective, this is still probably the single most important macro theme to understand right now.

Want a deep dive on this topic? Vote in the poll at the top of this email.

The AI story has evolved quite a lot over the past year.

At the start, markets were mainly focused on the excitement around tools like ChatGPT and the potential for artificial intelligence to transform industries.

Now the conversation is becoming much more serious:

Which companies can spend enough to dominate the AI race?

That’s why investors are paying so much attention to capital expenditure, or “capex”, from companies like Microsoft, Alphabet, and Amazon.

These firms are spending enormous amounts on:

The scale is huge. Tens of billions are being deployed because companies believe AI could become one of the most important technological shifts in decades.

What’s interesting is that AI is now starting to impact industries beyond just technology.

For example, markets are increasingly discussing the energy demand created by AI infrastructure. Data centres require huge amounts of electricity, which means AI growth could also benefit utilities, energy companies, and infrastructure providers.

At the same time, investors are beginning to ask tougher questions.

Yes, AI has enormous potential. But, will these companies actually generate enough returns to justify the level of spending?

That’s becoming one of the biggest debates in markets right now.

Some investors believe we’re still early in a major long-term investment cycle. Others think certain areas of the market are becoming overheated.

Either way, AI remains one of the most important themes driving equity markets, corporate investment, and market sentiment right now. From a commercial awareness perspective, it’s a very strong topic to understand properly.

Want a deep dive on this topic? Vote in the poll at the top of this email.

One of the more interesting stories in finance right now is what’s happening in private equity behind the scenes.

Over the past few years, many private equity firms bought companies at very high valuations during the low interest rate era. The assumption was that they would eventually exit those investments through IPOs or by selling the companies at even higher valuations later on.

The problem is that the exit environment became much tougher once interest rates rose sharply.

IPO markets slowed down significantly, financing became more expensive, and buyers became more cautious. As a result, many private equity firms are now sitting on portfolio companies for much longer than originally planned.

That matters because private equity firms eventually need to return money to investors like pension funds and sovereign wealth funds. In simple terms: They need liquidity.

Because traditional exits have been slower, firms have increasingly turned to alternative solutions like continuation funds and secondary deals.

A continuation fund is essentially when a private equity firm moves an asset from one fund into another so it can continue holding the company for longer rather than selling immediately.

Secondary deals involve investors selling stakes in private equity funds to other investors to generate liquidity.

This is important because it shows how the entire private markets ecosystem is adapting to higher interest rates and a slower deal environment.

From an interview perspective, this is a very strong topic because it goes beyond surface-level market commentary. Most students only talk about stocks or AI. Very few discuss private markets, liquidity pressures, or exit dynamics.

Understanding this makes you sound much more commercially aware and much closer to how finance professionals actually think about markets.

Want a deep dive on this topic? Vote in the poll at the top of this email.

Even though inflation has come down from the highs we saw a couple of years ago, markets still remain very sensitive to oil prices and geopolitical tensions.

Why?

Because energy still feeds into almost every part of the economy.

Over the past couple of weeks, markets have continued watching tensions linked to the Russia–Ukraine War, instability in the Middle East, and disruption risks around key shipping routes like the Red Sea.

The concern is relatively simple: If geopolitical tensions disrupt energy supply or trade routes, oil prices could rise sharply again.

And if oil prices rise significantly, inflation could start moving higher again too.

This is why markets care so much about geopolitics. It is not just about the political situation itself. Investors are constantly thinking about the second-order effects.

Higher oil prices increase transportation and production costs for businesses. Those higher costs can eventually feed through into consumer prices across the economy.

That then creates a problem for central banks.

Because if inflation starts rising again, central banks like the Federal Reserve and the Bank of England may have to keep interest rates higher for longer instead of cutting them aggressively.

This is why markets react so quickly to geopolitical headlines. Investors are effectively trying to assess whether events could eventually impact inflation and interest rate policy.

From an interview perspective, this is a very strong topic because it links together multiple themes at once:

And that ability to connect different areas of the market is exactly what interviewers are looking for.

Want a deep dive on this topic? Vote in the poll at the top of this email.

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China remains one of the most important economies in the world, which is why markets continue paying close attention to signs of weakness there.

The biggest issue is that China’s old growth model is no longer working as effectively as it once did.

For years, a huge amount of China’s growth was driven by property and construction. Developers borrowed heavily, large housing projects were built constantly, and the real estate sector became a major engine of economic activity.

Now that sector looks much weaker.

Property developers are still dealing with large debt burdens, housing demand has slowed, and consumer confidence remains relatively fragile. At the same time, Chinese consumers are spending less aggressively than markets had hoped, which is creating weaker overall demand across parts of the economy.

This matters because China is the world’s second-largest economy. If Chinese growth slows, it impacts:

In response, China is trying to pivot toward sectors like:

In simple terms, the government wants the economy to rely less on property and more on innovation and industrial development.

The challenge is that structural transitions like this take time and are rarely smooth.

From an interview perspective, this is a strong topic because it goes beyond short-term headlines. It shows you understand that markets are also driven by longer-term structural shifts, not just day-to-day news flow.

And given how interconnected the global economy is, weakness in China can quickly feed through into commodities, equities, and broader market sentiment globally.

Want a deep dive on this topic? Vote in the poll at the top of this email.

One of the biggest questions across finance right now is whether investment banking activity is finally starting to recover after a very difficult couple of years.

The answer is: Slightly, but we are definitely not fully back yet.

When interest rates rose sharply over the past few years, deal activity slowed down significantly. Borrowing became more expensive, valuations fell, and uncertainty increased across markets. As a result, many companies delayed acquisitions, IPOs, and large financing transactions.

That had a major impact on investment banks because lower deal activity generally means lower fees and weaker revenues.

Recently though, there have been some early signs of improvement.

M&A conversations are picking up again in certain sectors, particularly around technology and AI-related businesses. There is also a growing backlog of private companies waiting for the IPO market to reopen properly after delaying listings during the tougher market environment.

At the same time, activity in ECM and DCM has improved slightly.

ECM stands for Equity Capital Markets, which involves companies raising money through shares or stock offerings.

DCM stands for Debt Capital Markets, which involves companies raising money through bonds and debt issuance.

Both areas slowed significantly when rates rose aggressively, but conditions have started stabilising compared to the lows of the past couple of years.

That said, it’s important to keep perspective.

We are still nowhere near peak cycle conditions. Financing costs remain relatively high, investors are still cautious, and markets remain very sensitive to inflation and interest rate expectations.

From a student perspective, this topic is highly relevant because investment banking activity directly impacts hiring, deal exposure, and opportunities across the industry.

Understanding where we are in the cycle makes you sound much more commercially aware than simply saying: “Markets are improving.”

The stronger answer is: “Activity is recovering gradually, but the pace of recovery still depends heavily on interest rates and overall market confidence.”

Want a deep dive on this topic? Vote in the poll at the top of this email.

If you step back and look at everything we covered today, you start to realise that markets are still being driven by a relatively small number of core themes.

Interest rates remain the foundation. AI continues to dominate investment and spending. Private markets are adapting to a tougher exit environment. Geopolitical tensions are still feeding into inflation risk. China’s slowdown continues to weigh on global growth expectations. And investment banking activity is slowly trying to recover after a very difficult period.

The important thing is not memorising every headline or statistic.

It’s understanding how these themes connect together.

For example:

That ability to connect different parts of the market together is what makes someone sound genuinely commercially aware in interviews.

A lot of candidates only talk about markets at surface level. They’ll mention AI or interest rates because they’ve seen headlines on social media.

But the stronger candidates understand:

That’s the level you should aim for.

Before you go:

I’m putting out a deep dive later this week. One topic from today, properly broken down so you can actually use it in interviews. Cast your vote in the poll at the top of this email.

That’s all for now. ‘See’ you on Thursday!

Afzal