The main points of the allocation meeting on November 11, 2026
The correction in AI stocks pushed the market into deeply oversold territory last week, and we believe the conditions for a rebound are in place. The Democrats’ election win heightened concerns about a slowdown in data-center construction. On Thursday, the US Nasdaq 100 fell 6.4% and the Philadelphia Semiconductor Index 12.3%, both their worst days since March 2020. Semiconductor stocks are now around 30% below their recent highs, and the VIX rose to 28 from 16.6 on Wednesday. Over the week, world equities fell 2.6% in euro terms. Several measures showed the Nasdaq 100 as oversold as it was at the March 30 low, and the technology sector’s forward P/E fell to 17.3, its lowest since March 2020. The reaction to the election looks overdone. Opposition to data centers predates the vote, and the technology giants financing the investments remain financially strong. On Monday the semiconductor index rose 6.9% in a broad rally, with all 11 S&P 500 sectors ending higher.
The economy is surprisingly strong and no recession is in sight, but the price is sticky inflation and higher interest rates. The US economy added 165,000 jobs in October against a forecast of 65,000, and the unemployment rate fell to 4.1%. October consumer prices, released on Tuesday, rose 0.4% month-on-month and core prices 0.3%, both faster than expected. Over the week, the US two-year yield rose to 4.52% and the ten-year yield to 4.88%. On the geopolitical front, hopes for an end to the Iran war weighed on oil. WTI crude fell 12.8% over the week to USD 90.83 per barrel, its largest weekly decline since 2020.
Earnings are growing strongly, but investors have become more selective and are increasingly focused on quality and valuations. S&P 500 earnings grew 31.4% in the third quarter and 84% of companies beat estimates, although the beats were smaller than average. Expectations are high and growth is slowing: Goldman Sachs forecasts earnings growth to ease from 29% this year to 18% in 2027. Valuations have come down. The S&P 500’s forward P/E has fallen from 22.0 at the start of the year to 17.7, its lowest since November 2023, because earnings estimates have risen 33.6% year-to-date while the index is up only 7.4%. The key risks are a slowdown in the AI cycle, higher rates and geopolitical shocks. Attractively valued quality companies offer opportunities. The longer-term trend in equity markets remains intact.
We increased our weight in high yield corporate bonds. High yield corporate bonds have become more attractive as spreads have widened. The market’s attractive yield level provides a solid cushion against potential price swings. A strong economy and solid corporate fundamentals keep default risk contained, and we overweight high yield corporate bonds.
We overweight equities and underweight money markets. Within equities, we overweight emerging market equities, underweight European equities, and remain neutral elsewhere. In fixed income investments, we overweight high yield corporate bonds and underweight government bonds, while remaining neutral on emerging market bonds and investment grade corporate bonds.
