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Foreword by CIO
As we enter the final quarter of 2026, we are taking a more measured approach to markets. While the earnings outlook remains healthy, higher oil prices, elevated bond yields and uncertainty around the Federal Reserve have made the near-term environment less forgiving. Against this backdrop, we have reduced our overall equity allocation from overweight to neutral. Regionally, we have downgraded both the US and Emerging Market Asia to neutral, while retaining our neutral positioning in Europe and Japan. This is a tactical reduction in risk, rather than a change in our longer-term constructive conviction.
We continue to see opportunities, but believe greater selectivity is warranted. We favour profitable, cash-generative companies, while sectors such as banks, defence and healthcare offer areas of potential resilience and diversification. Within AI, the long-term investment thesis remains intact, although greater scrutiny around valuations, regulation and capital spending reinforces the importance of being selective.
Our stance is therefore cautious, but not defensive: stay invested, rebalance towards quality and preserve capacity to add when the risk-reward balance improves. I encourage you to speak with your Senior Client Advisor for tailored guidance on positioning your portfolio as the investment landscape evolves.
Thank you for your continued trust—we look forward to partnering with you through 2026 and beyond.
Outlook at a glance
Key themes to watch
US mid-term elections
US mid-term elections may create near-term market noise, but history suggests investors are better served by staying invested as uncertainty fades. The greater risks remain inflation, interest rates and earnings, rather than the election outcome itself.
AI’s second act
The next phase of AI investing is shifting from infrastructure providers to companies that can turn AI adoption into measurable revenue growth, cost savings and lower risks. Selectivity remains key, as adoption alone does not guarantee stronger earnings.
Super El Niño
A strong El Niño could intensify food inflation across ASEAN and India, while supporting agricultural commodity prices in the near term. Selective opportunities in industrial commodities may emerge over a longer horizon.
Asset allocation for 4Q 2026
Discover more insights
Report
A narrower path
Discover our 4Q 2026 Investment Outlook for perspectives on global macro trends, sector themes and opportunities shaping today’s shifting markets.
It takes a shared vision and focus to achieve all you aspire to.
The kind we have with all of our clients.
It takes a shared vision and focus to achieve all you aspire to.
The kind we have with all of our clients.
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