• Fed cuts interest rates but uncertainty surrounds cut in December
• Robust US corporate results
• Overweight in equities, small underweight in credits

Global equity markets continued their upward trajectory in October, demonstrating notable resilience despite renewed geopolitical tensions, a US government shutdown, and persistent concerns around elevated technology valuations. The S&P 500 gained 2.3%, reaching another record high, while European equities delivered solid results, with the MSCI EMU up 2.4% and the MSCI UK gaining 4.2%. Emerging markets extended their strong momentum, rising 4.2% in October and surpassing 33% year-to-date. Fixed income markets also posted modest gains, supported by a decline in long-term yields: US Treasuries were up 0.6% and the Pan-European Aggregate Index gained 0.8%.

 

As we enter November, global equities have now advanced for seven consecutive months – the longest winning streak since 2021. Although valuations and political uncertainty have sparked bouts of volatility, we are confident that this bull market still has further upside potential. Earnings continue to surprise to the upside: S&P 500 earnings per share are on track for approximately 12% growth in the third quarter. Importantly, valuation levels – particularly in technology – appear more justified when seen through the lens of shifting index composition and strong underlying cash flows. The resilience of this rally—despite headwinds such as trade tensions and shutdown risks—continues to underscore the strength of underlying fundamentals.

 

Late-month progress in US–China trade discussions helped lift global sentiment, especially for companies within AI-related supply chains. This follows a period of intensified rhetoric earlier in the month, demonstrating the persistent market sensitivity to geopolitical developments. Notably, market concern around the US government shutdown has receded, consistent with the historical trend of limited and short-lived macroeconomic impact.

 

Slightly softer inflation data in the US and a more cautious tone from the Federal Reserve have reinforced expectations of a near-term pause in rate hikes, supporting market confidence—particularly in growth- and technology-focused equities. In contrast to previous speculative periods, today’s AI-driven momentum is underpinned by real capital expenditure and earnings growth, with the largest tech firms signaling further investment in digital infrastructure and cloud capacity through 2026.

 

A significant part of US economic resilience continues to come from sustained investments in artificial intelligence infrastructure—supporting both corporate profitability and sectoral leadership. Despite the market rally, overall investor positioning remains cautious, lending further contrarian support to a measured pro-equity stance.

 

Regionally, the economic picture remains mixed: while US growth is resilient yet increasingly concentrated in technology and infrastructure investment, Europe is recovering gradually with services compensating for industrial weakness. In Asia and emerging markets, selective opportunities persist amid ongoing trade headwinds and geopolitical uncertainties.

 

Looking forward, we continue to hold a constructive view on equities, supported by solid corporate fundamentals and a still-accommodative policy environment. Our equity overweight remains centered on the United States, where earnings momentum and economic resilience are most apparent. In fixed income, we retain a neutral stance on government bonds and are selective in credit, given current spread levels. While Europe is showing tentative signs of improvement, we expect a more subdued earnings path relative to the US. We stay vigilant toward evolving policy signals and geopolitical developments but see no compelling reason at this stage to materially adjust our positioning.

 

Please find attached our last Asset Allocation Update for November.