Market Update 10/2026 | Central Banks Turn Hawkish as Energy Keeps Inflation Elevated

Central Banks Turn Hawkish as Energy Keeps Inflation Elevated; Earnings Strengthen and Bonds Stay Attractive

In October 2026, T&T International maintains an Attractive stance on equities across the US, Europe, the Eurozone, Switzerland, the UK, Emerging Markets, Asia ex-Japan, Japan, China A-shares, India, Malaysia, Singapore, Taiwan and Australia. The global earnings cycle continues to strengthen, supported by improving manufacturing activity and robust AI investment. Modest policy tightening may create volatility, but it should not derail the equity outlook while economic growth and corporate profits remain resilient. At sector level we favour a combination of cyclicals, such as consumer discretionary and banks, and sectors exposed to structural trends, such as industrials and health care.

We maintain an Attractive view on bonds overall, with corresponding Attractive views on high grade, investment grade, emerging market and high yield. The past month was challenging, with yields reaching new cyclical highs as inflation concerns and the escalating conflict in the Middle East disrupted energy markets. Broad commodities, copper, structured investment strategies in gold and active commodity strategies remain Attractive. In FX, the GBP, NOK and CNY stay Attractive while the NZD moves to Neutral. Markets now price significant additional ECB and Fed tightening, which we consider somewhat excessive, and despite a more hawkish Fed we expect a weaker US dollar on the back of fiscal concerns and the upcoming midterm elections.

The Topic of the Month, Economy and Interest Rates, looks at what elevated energy prices mean for monetary policy. With no solution in sight in the Middle East, prices for oil, gas and refined products keep inflation rates high. For central banks the decisive question is whether second-round effects materialise, for example if companies pass on higher transport and energy costs or if workers demand wage adjustments. The ECB expects them and has already raised rates twice, with a further step due in December, while the Fed began a moderate hiking cycle in September. The SNB can afford to wait. The economy proved surprisingly resilient in the first half, so central banks can focus on inflation, but the longer the tension persists, the greater the risk of second-round effects and the burden on growth.