The main points of the allocation meeting on October 28, 2026
Global equities fell last week as concerns over returns on AI investment resurfaced and European earnings disappointed. The Philadelphia Semiconductor Index fell 3.2% over the week, while in Europe the euro-area bank index declined 5.1%. Although the correction in both momentum and growth stocks continued, more attractively valued value stocks rose as investors looked for alternatives. Over the week, the global equity index fell 0.7% in euro terms. Equities declined 2.5% in Japan, 2.2% in emerging markets in euro terms and 1.6% in Europe, while US equities fell a more modest 0.5%.
Oil prices rose further as the conflict in the Middle East spread to Saudi energy infrastructure. Brent crude rose 6.2% over the week to USD 116.72 per barrel. That is its highest close since late April and its third consecutive weekly gain. The rise was driven by attacks on Saudi oil facilities, including the port of Yanbu and the Shaybah oil field, which Yemen's Houthis have claimed.
The equity market turbulence pushed US Treasury yields lower. The 10-year Treasury yield fell 19bp to 4.95% on Thursday as investors sought safe havens and ended the week at 4.99%. That is nearly 40bp below its October 7 peak of 5.36%, the highest level since 2002. In the euro area, French government bond yields continued to rise. At the end of the week, Fed funds futures priced a roughly 90% probability that the Fed will keep rates unchanged at 3.75–4.00% at this week's meeting. They still priced around an 80% probability of a hike by the December meeting.
The key events in the coming days are central bank decisions and earnings from the largest technology companies. The Federal Reserve announces its rate decision on October 28, the ECB on October 29 and the Bank of Japan on October 30. The first estimate of US third-quarter GDP and September PCE inflation will be released on October 29. Microsoft and Alphabet report on October 28, Amazon on October 29 and Apple on November 2.
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.
