HSBC AM Investment Monthly October 2026

Bonds go back to the future October 2026

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This document provides a high-level overview of the recent economic environment. It is for marketing purposes and does not constitute investment research, investment advice nor a recommendation to any reader of this content to buy or sell investments. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

Macro Outlook Policy Outlook  Continued Middle East tensions have boosted oil and refined product  Policy uncertainty is high. Central banks are facing difficult growth-inflation prices. Elevated energy prices have raised concerns about upside inflation risks trade-offs due to supply-side shocks. Fiscal and industrial policy is more activist, and contributed to a rise in bond yields across many economies but elevated government debt is a constraint  US domestic demand is solid but imbalanced. However, strong profits  The Federal Reserve hiked by 25bp with the projections suggesting 1-2 more should support a broadening out of investment beyond AI, improved labour increases in this cycle. Recent ECB comments suggest further tightening, but the market conditions, and a gradual rebalancing of the K-shaped dynamics rate path is dependent on energy prices. The BoE signalled a near-term rate hike  AI and policy buffers have supported Asia’s growth, but it is exposed to the risk  The interplay of energy headwinds, tech tailwinds, and fiscal support has driven a of global AI demand shifts and energy supply shocks. China’s growth is hawkish monetary policy tilt across Asia amid higher global rates. China’s resilient amid technology and export strength, but still imbalanced policy balances short-term macro stability with longer-term structural priorities

House View Scenarios  Our central scenario remains a “broadening out” of profits and market performance, helped by AI spillover effects. Markets should remain resilient, but BROADENING Market returns broaden out amid AI spillovers. Oil shock sticky inflation, higher real yields, and geopolitical risks could cause volatility OUT moderates. EM bull market. Gradual dollar depreciation

 Equities are supported by strong earnings, but stretched valuations, and concentrated AI exposure leave little room for disappointment. As the AI capex boom matures, upstream and downstream sectors should benefit Sharp US slowdown as real incomes undermined and profits SHOCKWAVE disappoint. SPX bear market. Credit spreads widen  We see strength in Japan, emerging markets and selected European equities, alongside high-quality investment-grade credit and EM fixed income. Elevated DM government bond yields can provide income for portfolios. In periods of market stress, bonds’ hedging characteristics should also re-emerge PRODUCTIVITY AI-related productivity miracle. US bull market persists, EM MIRACLE gains. Strong US growth and higher US rates supports USD

The commentary and analysis presented in this document reflect the opinion of HSBC Asset Management on the markets, according to the information available to date. They do not constitute any kind of commitment from HSBC Asset Management. Consequently, HSBC Asset Management will not be held responsible for any investment or disinvestment decision taken on the basis of the commentary and/or analysis in this document. Diversification does not ensure a profit or protect against loss. 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. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Source: HSBC Asset Management as at October 2026.