Deficits boost stocks as prediction markets hit $45B

Breakingviews argues the U.S. bull market is propped up by a "large deficit model" rather than AI‑driven growth. That means any fiscal tightening could quickly deflate equity gains, exposing investors to a hidden vulnerability.

The UK Gambling Commission now treats the misuse of non‑public information in betting as a form of cheating under the Gambling Act. This blurs the line between legitimate edge and illegal insider betting, exposing operators and bettors to harsher penalties and reshaping how prediction markets are policed.

June saw Kalshi’s notional volume jump to over $31 billion, a 70% rise from May, while Polymarket topped $10.8 billion, both driven by World Cup betting. New entrant Rothera, backed by Susquehanna and Robinhood, handled $2 billion in its debut month, now accounting for 7% of U.S. prediction‑market traffic. The surge tests whether these platforms can sustain high‑volume, regulator‑scrutinized markets.

The new "MANGOS" label, Meta, Anthropic, Nvidia, Google, OpenAI and SpaceX, has been hyped as the next AI rally driver, but recent data shows all three listed public stocks fell last month amid data‑center over‑spending worries and debt concerns. The acronym’s shelf life may be shorter than investors hoped, risking a pullback for AI‑heavy portfolios.

West Shore Home tapped Claude‑driven AI to scan bathrooms, automate design, and streamline installs, lifting gross revenue to $1.15 billion while shaving off roughly 1,000 hires. CEO W.J. Werzyn says the boost shows AI can replace middle‑tier labor, but the technology still hallucinates and can’t handle the “last‑mile” human judgment.

Rivian has started delivering its R2 mid‑size SUV to the public, marking the first real revenue stream from the vehicle aimed at a broader market. The R2, priced from $57,990, promises a lighter, more affordable platform while retaining off‑road capability, potentially unlocking growth for the EV maker beyond its niche segment.

Many multinational consumer firms are losing market share in China; to stay afloat they are selling stakes to local private‑equity groups, giving partners capital and market knowledge. This shift signals a new “China‑partner” model that could reshape foreign brand strategy and boost Chinese PE activity.

PayPal reported Q1 2026 revenue of $8.35 billion, up 7% YoY, while non‑GAAP EPS beat at $1.34. The company also announced that U.S. users can now pay at Chinese merchants via WeChat Pay’s QR‑code network, expanding its cross‑border reach. The moves aim to boost transaction volume and revive growth.

Brookings and the Fed model shows a once‑in‑a‑generation AI productivity shock could shrink the U.S. deficit from 6% to 2% of GDP, but five AI‑specific side effects, higher entitlement spending, a narrower tax base, rising debt‑service costs, labor‑force shifts, and defense spend, erase more than half the savings.

A weak July jobs report and 2‑year Treasury yields slipping below 4.14% have dented the dollar’s recent gains. The euro steadied around $1.13 and the offshore yuan rallied to CNH6.82, indicating the Fed’s hawkish hold may no longer be supporting a stronger greenback.

BlackRock closed its $12 billion purchase of HPS Investment Partners on July 1 2025, merging HPS’s $190 billion private credit franchise with its $3 trillion public fixed‑income business. The new Private Financing Solutions platform lets the firm offer integrated public‑private credit products, positioning it to capture record inflows into private markets.

Prologis has lodged an indicative all‑share offer to acquire Segro for roughly £12.6 billion, valuing each Segro share at 925 pence. The deal would give Segro shareholders about 10.5% of Prologis and broaden the U.S. REIT’s European logistics and data‑center footprint, potentially unlocking significant synergies.