Market Perspectives: What’s in store for Q4?

Political and fiscal constraints, Iran-related uncertainty and resilient corporate earnings should produce a volatile but broadly constructive fourth quarter for risk assets.

• The US midterm elections in early November could give Democrats control of the House while leaving the Senate closely contested, constraining President Trump’s policy agenda.
• US borrowing remains unusually high despite an economy that may have grown at an annualised rate above 4% in Q3 2026, while rising Treasury yields appear to reflect inflation risk more than immediate debt-sustainability concerns.
• The UK Budget at the end of October is unlikely to deliver significant stimulus because higher bond yields are raising debt-service costs and reducing fiscal headroom; France’s deficit remains above 5% of GDP amid political fragmentation.
• Renewed uncertainty over Iran and the normalisation of trade and energy routes could push commodity prices higher, revive inflationary pressure and increase volatility in rates and bonds.
• Corporate earnings growth in 2026 has exceeded expectations in both breadth and scale, and resilient economic activity may support risk appetite, although it also gives central banks room to keep rates restrictive or raise them further.

Takeaway: The outlook remains constructive for risk assets, but investors should expect bouts of volatility in rates and bond markets and remain alert to a higher-for-longer interest-rate environment; a material deterioration in the geopolitical or macroeconomic backdrop would invalidate this view.