The main points of the allocation meeting on October 14, 2026
The third-quarter earnings season got under way this week, and another round of positive earnings surprises looks likely. According to Bloomberg, third-quarter earnings are expected to grow by 57% year-over-year in emerging markets, 27% in the United States and 18% in Europe. Analysts raised their U.S. earnings estimates during the quarter, and a record number of S&P 500 companies issued positive EPS guidance. According to FactSet, actual S&P 500 earnings growth has exceeded the end-of-quarter estimate in 37 of the past 40 quarters, and over the past four quarters reported earnings have beaten estimates by 13.8% on average. The season has also started strongly, with 84% of the 19 S&P 500 companies that had reported by October 9 posting earnings above the mean estimate.
Government bond yields climbed to their highest levels in nearly two decades, while oil prices stayed elevated on Middle East risks. The U.S. 10-year Treasury yield ended last week at 5.24%. In Europe, concerns over French debt pushed the country's 10-year yield above 4.90% intraday, and the OAT-Bund spread widened to around 140 basis points, a level not seen since the euro crisis of 2011–2012. Prime Minister Sébastien Lecornu's minority government is pushing through a 2027 budget that includes EUR 54 billion of fiscal tightening. Brent crude rose 2.4% over the week to USD 104.72 per barrel, but prices fell on Friday after President Trump said the United States would not strike Iran before the November 3 midterm elections and described talks with Iran as productive. The swings in oil prices have kept inflation risk premia elevated in both U.S. and European rates markets.
The calendar for the coming weeks includes key earnings releases and three major central bank decisions. The U.S. September consumer price index is due on Wednesday, October 14, followed by Taiwan Semiconductor's (TSMC) third-quarter results on Thursday, October 15 — a key gauge of AI-related capital spending across both U.S. and Asian supply chains. The Federal Reserve meets on October 27–28, the European Central Bank announces its rate decision on October 29, and the Bank of Japan on October 30.
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.
