Wm weekly market view will earnings resolve the bond equity split

WS Global CIO Office 9 October 2026

Will earnings resolve the bond-equity split?  Bond and equity market volatility has sharply diverged. Elevated bond volatility and political risks in the US and Europe warrant near-term caution, prompting us to lock in tactical gains in semiconductors and Taiwan equities.

 Our quantitative stock-bond model turned negative for the first time since March 2025, signalling near-term equity volatility. We stay invested in a diversified allocation slightly overweight equities and prefer to navigate the upcoming results and macro events before adding back high-beta exposure within equities.

 Consensus estimates point to a 31% y/y rise in S&P500 Q3 earnings, driven by technology-sector earnings growth of 67%. Earnings have beaten lofty What are the market estimates in H1 as the AI build-out implications of France’s exceeds expectations. This favours political and fiscal uncertainty? tech-led equities in the medium term.

 In Europe, French political and fiscal What is your outlook for the risks cloud the EUR outlook, but US Q3 earnings season? regional bank equities remain attractive on robust profitability, capital strength and valuations. Do you see further upside for USD/JPY?

Important disclosures can be found in the Disclosures Appendix.

Standard Chartered Bank WS Global CIO Office | 9 October 2026

Charts of the week: Diverging volatility Strong earnings should resolve the bond and equity market divergence; French political risks remain largely contained S&P500 volatility index (VIX); US bond volatility index (MOVE)* 10-year government bond yield spreads over German bonds bps Index Index Oct-10 Oct-14 Oct-18 Oct-22 Oct-26 10 50 France Germany 10-year spread Oct-25 Feb-26 Jun-26 Oct-26 Italy Germany 10-year spread VIX Index MOVE Index (RHS) Spain Germany 10-year spread Source: Bloomberg, Standard Chartered; *measures US government bond volatility

Editorial Will earnings resolve the bond-equity split? The macro uncertainty prompted us to lock in gains in semiconductor and Taiwan equity opportunistic ideas. Strategy summary: Bond and equity market volatility has Strong Q3 earnings season likely to overcome near-term sharply diverged. Elevated bond volatility and political risks in challenges. Strong US and Asian earnings should ultimately the US and Europe warrant near-term caution, prompting us to resolve the equity-bond divergence in favour of stocks. lock in tactical gains in semiconductors and Taiwan equities. Consensus S&P500 Q3 earnings growth has risen to 30.6% Our quantitative stock-bond model turned negative for the first y/y, while technology is tracking 66.5%, driven by the AI time since March 2025, signalling near-term equity volatility. infrastructure buildout. AI investment plans, monetisation and We stay invested in a diversified allocation slightly overweight funding needs are key metrics to watch. Record memory-chip equities and prefer to navigate the upcoming results and macro profits and higher long-term targets from AI leaders support events before adding high-beta exposure within equities. staying long technology-led risk assets and using near-term Consensus estimates point to a c. 31% y/y rise in S&P500 Q3 volatility to scale into preferred sectors. Also, US equities have earnings, driven by technology-sector earnings growth of c. historically performed strongly in the 12 months after mid-term 67%. Earnings have beaten lofty estimates in H1 as the AI elections, particularly when the opposition regains control of the build-out exceeds expectations. This favours tech-led equities House and the Senate – as seems increasingly likely. in the medium term. In Europe, French political and fiscal risks Medium-term constructive on equities. Beyond Q3 earnings, cloud the EUR outlook, but regional bank equities remain we expect US earnings to rise 15-20% next year. Almost half of attractive on robust profitability, capital strength and valuations. the estimated USD 420 per share of S&P500 earnings in 2027 Divergence between equities and bonds. Equity markets should come from tech-related sectors: information technology, signal calm, with the S&P500 index near record highs and its…