The main points of the allocation meeting on September 23, 2026
The Federal Reserve raised rates for the first time in three years and signaled further tightening. Last week, the FOMC voted unanimously to lift the federal funds target range by 25bp to 3.75–4.00%, its first increase since July 2023. The message was more hawkish than the hike itself: 16 of the 18 participants who submitted projections expect at least one more increase this year, and the median policy rate projection rose to 4.1% for both 2026 and 2027. Chair Kevin Warsh said inflation has been too high for too long and that this summer's readings do not show a meaningful improvement in underlying trends. After the meeting, markets priced an 87% probability of at least one more hike this year.
The US 10-year Treasury yield closed above 5% for the first time since 2007. Rising oil prices briefly fueled inflation concerns last week. Brent crude came close to USD 110 per barrel before reversing, and it ended the week 0.7% lower at USD 103.87. The 10-year yield finished the week at around 4,99%. The more policy-sensitive 2-year yield rose 12 basis points to 4.74%, narrowing the gap between the two to 25bp from 33bp. Tightening is also under way elsewhere. The Bank of Japan raised its policy rate to 1.25%, the highest level since 1995.
Key US macro data are due over the coming weeks, and the third-quarter earnings season gets under way in mid-October from a supportive starting point. August PCE inflation, the Fed's preferred measure, is published on September 30, and the September employment report follows on October 2. The earnings season begins in earnest on October 13, when JPMorgan reports on the same day as the September CPI release. Consensus expects global earnings to grow by around 25% year on year. Analysts have raised third-quarter estimates during the quarter, contrary to the usual pattern of downward revisions, and in the second quarter 86% of S&P 500 companies beat expectations. We see room for positive earnings surprises, and historically equity markets have tended to rise during the first weeks of the reporting season.
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.
