The main points of the allocation meeting on September 16, 2026
Higher bond yields, hawkish central banks and rising oil prices are unsettling markets, but we believe the underlying economic momentum will win out. Last week, US 10-year yields rose 18.5 basis points to 4.97% and German Bund yields climbed 16.5 basis points to 3.50% — the highest since 2009 — as this week's central bank "super week" gets underway, with the U.S. Federal Reserve System’s (Fed) decision on Wednesday and the Bank of Japan on Friday. The price of Brent crude oil rose 8.65% last week to $107.56 per barrel on Middle East supply risk. Despite this volatility, we see solid economic momentum, a strong earnings tailwind, and still-improving and broadening corporate investment as the more durable drivers of market performance, and expect equities to trade higher on a 3–6 month horizon. This view is reinforced by the improved outlook for the global economy: activity indicators point to demand running comfortably above trend, and central banks to keep tightening for longer, as a more persistent inflation backdrop keeps them on guard even as growth stays firm.
A rare consensus emerged among leading AI executives over the weekend that safety and oversight may not be keeping pace with the speed of development, and Trump's rejection of a pause triggered a broad tech-led sell-off. Yet the underlying AI investment cycle continues to drive stronger output, trade and investment across United States and Asia, with the benefits increasingly spilling over into sectors such as construction and industrials — a reminder that this weekend's debate was about safety and oversight, not about the technology's economic momentum.
August core CPI in US rose more than expected, up 0.29% month-on-month, reinforcing the case for the Fed's rate decision this week. Combined with the Producer Price Index (PPI) print, this points to core Personal Consumption Expenditures Price Index (PCE) inflation of around 0.27%, adding to evidence that underlying price pressures remain elevated as the Fed prepares to raise rates. We see the ongoing AI-driven investment boom as adding to nominal demand and giving companies greater pricing power, which is why the inflation backdrop may prove more persistent than many investors currently expect.
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.
