Investment Weekly 30 October 2026

The AI investment boom is supporting growth and profits, but inflationary energy shocks and China’s export surge will keep markets volatile and favour selective broadening rather than indiscriminate risk-taking.

• The Federal Reserve faces a K-shaped economy: AI-linked sectors remain buoyant while rate-sensitive industries weaken, with the S&P 500 supported by megacap earnings and the Russell 2000 pressured by expectations of a peak funds rate above 4.50% in 2027.
• HSBC expects only two further Fed hikes rather than the three priced by markets, followed by a modestly weaker US dollar and a broader equity rally as AI spillovers and profit growth spread across sectors and regions in 2027.
• Securitised credit offers income beyond tightly valued corporate bonds because floating-rate structures have near-zero duration risk, but structural complexity and lower liquidity make research, security selection and manager expertise important.
• US midterm elections may reduce political uncertainty and support equities, although the article cautions that inflation, rates and AI remain larger volatility drivers and that another 20% market gain would be demanding.
• Brazil’s fiscal repricing creates potential in rates and equities if political compromise improves fiscal credibility, while UK gilt yields may remain elevated as fiscal consolidation relies heavily on tax rises and the Bank of England could raise rates towards 4.50% in the first half of 2027.

Takeaway: Maintain a cautious pro-risk stance, favouring lower-valuation regions such as Asia and emerging markets, global duration selectively, quality credit and diversified exposure to the AI-led broadening trade; tight spreads, fiscal risks, oil prices and geopolitical shocks remain key constraints.