Market Overview

Global markets enter the final quarter of 2026 with resilient growth, persistent inflation and restrictive interest rates. Earnings remain supportive in several regions and Asian industrial activity is improving. However, elevated valuations, narrow leadership and rising government borrowing costs leave less room for error.

Our positioning reflects this more selective environment. Commodities remain relatively Overweight, while all major equity regions are Neutral. In fixed income, we favour intermediate US government bonds and remain cautious on international duration and broad credit.

A More Selective Investment Environment

The central tension is between resilient nominal growth and a higher cost of capital. August headline US PCE inflation was 3.4% year-on-year, while core PCE inflation was 3.0%. The Federal Reserve’s September projections placed full-year 2026 core PCE inflation at 3.4%. With inflation still above target and fiscal pressures increasing, policy is likely to remain restrictive and long-dated government bonds may require a higher risk premium. Equity earnings also remain concentrated among technology and semiconductor leaders.

This environment favours assets with resilient cash flows, reasonable valuations and clear portfolio roles. We are less willing to own broad exposure where returns depend on rapid rate cuts or further credit-spread compression.