The main points of the allocation meeting on September 30, 2026
Strong economic data and rising rate-hike expectations pushed bond yields sharply higher. The US PMI rose to 58.4, its highest level in five years, and the market-implied probability of an October Fed rate hike briefly reached 70%. The 10-year Treasury yield climbed above 5.20% this week, touching its highest level since 2007. The German 10-year yield rose to 3.60%, a post-2009 high, and euro government bonds returned -0.5% last week.
Equities withstood the rise in yields, but corporate bond markets showed some signs of strain. In local currency terms, US equities rose 1.2% and European equities 0.7% last week, while emerging market equities gained 1.8% in euro terms. Technology stocks led the gains. US high yield spreads widened by 27bp, the most in almost a year.
Talks between the United States and Iran produced no breakthrough, although lines of communication remain open. At Qatar-mediated talks in New York, Iran offered to reopen the Strait of Hormuz within seven days if its conditions, including sanctions relief and an end to the US blockade, are met. President Trump rejected the proposal as inadequate, and on Sunday Tehran said it would not back down from its demands. Brent crude ended the week at USD 104.32 per barrel.
Key events ahead include US inflation and labor market data. US August PCE inflation is due on September 30, the ISM manufacturing index on October 1, and the September employment report and eurozone inflation on October 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.
