AM Investment Weekly 09 10 26

Investment Weekly 9 October 2026 For Professional Clients only. Marketing Communication.

Chart of the week – Climbing the wall of worry

8000 Hormuz crisis 7000 S&P 500 index

Russia/ US 10y 5000 > 5% Ukraine Liberation Day 4000 Covid

Markets have faced greater uncertainty over the past few years, contending with a once-in-a-century pandemic, commodity price spikes, and a breakdown in the established rules-based global order. Yet they have shown impressive resilience. This is being demonstrated once again as the S&P 500 inches toward the 8000 level despite the headwinds French bonds → of high oil prices, a hawkish Fed, surging bond yields and increasing focus on existential risks posed by AI. The bond market vigilantes The Covid recovery was about huge doses of policy stimulus. The 2022 commodity shock dissipated as global target France economies rewired supply chains. And the post-Liberation Day experience has been a textbook one of fleeting geopolitical risk premiums. But exceptional profit growth is now doing the heavy lifting. Consensus profit growth for 2026e of 36% globally and 34% in the US are three to four times their long-run averages. This doesn’t necessarily mean the coast is clear. A market derating tells us that higher bond yields and geopolitics do matter. EPS numbers will cool in 2027 and could be downgraded if the AI capex bonanza disappoints. They are also very concentrated, mainly in tech and commodities. Profits broadening will be an important theme for next year. Oil and bonds → What’s more, sticky bond yields pose a constant threat to the valuation arithmetic – the opportunity cost of buying stocks is now higher. We are seeing pockets of weakness in more rate sensitive parts of the market – the Russell 2000 Why lower oil prices aren’t a is down by nearly 10% since August highs and lower tier credit spreads have gapped out. But for the time being silver bullet for bond yields broader corporate fundamentals look robust enough to weather the storm. #stocks #profits

Market Spotlight China stocks: the next big hit? When a legendary pop star hits a career slump, casual listeners simply tune out until the next big single arrives. Asia Private Credit → Jumping back on the bandwagon late costs them nothing. In public markets, you don’t have that luxury. By the time a turnaround is obvious, the rebound has happened and the easy gains are gone. Opportunities to diversify portfolios Could Chinese stocks be staging that very comeback? While near-term sentiment remains weighed down by soft domestic demand, and perhaps limited evidence of AI monetisation, underlying fundamentals are turning. The GDP deflator has finally swung positive after three years of deflation, supported by Beijing’s "anti-involution" policies curbing ruinous price wars. Meanwhile, corporate earnings are tracking low double-digit growth, led by strategic onshore sectors. Crucially, Chinese stocks offer an attractive hedge against global AI trades. Supported by tech localisation and Read our latest views: high-end manufacturing, China’s tech ecosystem operates on its own cycle, leaving earnings far less exposed to US India Insights October hyperscaler capex risks. For investors seeking a counterweight to the crowded Western tech trade, the potential 2026 opportunity may lie in acting before the broader market refocuses on it. #china #stocks

The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. The level of yield is not guaranteed and may rise or fall in the future. Past performance does not predict future ret urns. For informational purposes only and should not be construed as a recommendation to invest in the specific company, country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Asset Management accepts no liability for any failure to meet such forecast, projection or target. Index returns assume…