The main points of the allocation meeting on August 19, 2026
We are raising our equity allocation and narrowing our underweight in European equities. Historically strong global earnings growth is expected to continue accelerating into the end of 2026. Despite a seasonally more volatile stretch ahead, the AI infrastructure segment already went through a meaningful correction this summer, which we see as having reduced some of the froth in that part of the market. Separately, we are narrowing our underweight in European equities, reflecting a more resilient European economy and broadening earnings growth across sectors, though we remain slightly underweight the region.
Global government bond markets sold off last week, driven by a pronounced steepening at the long end of the curve. Front-end yields still priced out a near-term Fed hike after softer US inflation and activity data, while ECB in Europe is expected to hike in September. Longer-dated yields moved sharply the other way, with the 10-year Treasury yield rising to 4.69% and the German 10-year Bund yield rose to 3.20%.
Global equity markets advanced broadly last week, led by a strong rebound in emerging markets and continued strength in Japan. Emerging market equities rose 2.4% in euro terms, recovering sharply after a recent soft patch, while Japan advanced 3.0% and Finnish equities gained 1.5%. European equities were roughly flat, down 0.1%, and US equities posted a more modest 0.4% gain, leaving world equities (EUR) up 0.6% on the week.
We overweight equities and underweight money markets. Within equities, we overweight EM 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.
