Investment Strategy Focus September 2026
The bond vigilantes are back
- Jumbo sovereign + corporate bond supply: the German 10-year bund yield has risen to its highest in 15 years at 3.2% as global debt sustainability concerns rise. Debt issuance volumes are greatest in the US given the need to finance a 6%+ (of GDP) Federal budget deficit, plus heavy tech sector credit supply.
- A good entry point in euro bonds and credit: we see value in both core eurozone sovereign bonds (upgrade to Positive) and in euro investment-grade credit (we stay Positive). Increase long-term euro bond and credit allocations now given these more attractive starting yields.
- Is the Japanese yen finally set to strengthen? The end-July coordinated Japanese/US currency intervention has reversed some yen weakness, USD/JPY going from JPY 164 to USD 159 per USD. It is too early to conclude that this represents a trend change for the yen, given 3 prior failed reversals this year. Modest further yen appreciation expected to JPY 155 in 12 months.
- Stock markets at new all-time highs, thanks to positive earnings revisions, buoyant sentiment and plentiful liquidity. US equal-weight indices, banks and resource sectors lead, while the former momentum darling Technology lags. We upgrade our global equity view to Positive as we see these positive trends persisting into 2027.
- Keeping the faith in gold: gold has rallied 16% since mid-July to USD 4640/ounce as US Fed rate hike expectations have eased and central bank buying has picked up. We could see even lower US short-term rates and USD ahead, particularly if the oil price cools. We maintain a Positive stance and a 12-month USD 5000 target.
Edmund Shing
Chief Investment Officer
