Asset Allocation update – Q4 2026

Equities remain the preferred use of the portfolio’s risk budget, while higher bond yields create a modest opportunity to add duration.

• Inflation risks are keeping central-bank policy and interest-rate expectations volatile, pushing bond yields to levels not seen since before the global financial crisis.
• Middle East negotiations have lost momentum ahead of the US midterm elections in early November; oil exports are approaching prewar levels, but refined-product and liquefied-natural-gas exports remain below them.
• Business surveys indicate positive, stable growth, and resilient corporate earnings extend beyond AI-related sectors, supporting the view that the economic backdrop is robust without overheating.
• The rise in yields makes equities face greater competition, but a positive Middle East development could reduce oil-driven inflation expectations and bond yields; a prolonged conflict would instead create significant energy and macroeconomic risks.
• Columbia Threadneedle keeps equities at “Mildly Favour” and government bonds at “Mildly Favour”, prefers the US and Asia, and considers investment-grade, high-yield and emerging-market bonds relatively unattractive because spreads are near historic lows.

Takeaway: Maintain a constructive equity bias and add government-bond duration modestly, while monitoring whether central banks turn more aggressive, fiscal risks intensify or the Middle East conflict becomes a prolonged shock; continued earnings growth is expected into 2027.