Investors’ Outlook: A bowl of tricky treats

A bowl of tricky treats

Over the last month, investors have again been rewarded for showing up at markets’ doorstep. We believe the narrative around money supply, fiscal policy, and central bank easing still holds, and we find it difficult to build a bearish case in this environment.

Despite occasional volatility, risk assets have kept climbing. Some shine has come off gold as prices have retreated from their all-time highs, while equities have continued to rise, along with US Treasuries.

Investors still got some jitters ahead of Halloween, though. US regional banks briefly spooked markets after Zions Bancorp and Western Alliance Bancorp disclosed bad loans tied to funds that invest in distressed commercial mortgages. Coupled with the recent bankruptcies of subprime lender Tricolor Holdings and auto supplier First Brands Group, the industry-wide banking index declined amid worries that there might be more hidden credit troubles lurking in the shadows.

Macroeconomic developments also contributed to suspense. Japan has now joined the global stimulus story as new Prime Minister Sanae Takaichi’s early rhetoric points to more government spending, which would add yet another major economy to the list of those providing fiscal support. And in China, gross domestic product growth slowed to 4.8 percent, slightly better than the 4.7 percent expected, though year-to-date growth of 5.2 percent keeps Beijing on track for its 5 percent target this year. We consider valuations in Chinese equities low and believe they can offer diversification away from concentrated exposure to artificial intelligence (AI).

Speaking of AI, many investors have been wondering about a bubble. We believe it’s worth flipping through the 1990s playbook. Equity multiples peaked near 100 times earnings ahead of the dotcom bubble¹, and we’re nowhere near that today. Beyond that, most of the internet high-flyer companies weren’t profitable, whereas today’s tech titans aren’t only highly profitable, most are also net cash. So before we speak of bubbles, we’d likely first need to start seeing activity such as leveraged buyouts, corporate share issuance, or oversized buybacks. Early signs, like the US Securities and Exchange Commission’s review of a proposed five-times-leveraged NASDAQ product², suggest retail investor interest to take on leverage exists, but it’s still early days.

In this Investors’ Outlook, you’ll find the Multi Asset Boutique’s outlook for 2026, a closer look at cocoa prices, and our take on the stock market.

Some headlines can haunt markets. But we believe diversifying is the real trick, and we aim to help our clients find a variety of treats to choose from.