In line PPI and CPI bring the Fed to raise rates by 25bp on Wednesday; now there are two hikes forecasted by the US Central Bank before the end of the year. The BoJ will also hike rates on Friday; the message will be very important and be closely scrutinised. The BoE, on Thursday, seems the only Central Bank to stay put for the time being. Oracle did shine last week, but a post by Anthropic’s CEO Dario Amodei on slowing down the development of AI brought a new headwind into the market and casts a cloud over technology. The S&P 500’s multiple is just above 19x (19.1x), but all eyes are on inflation, rates, sovereign yields, and Central Banks. Renewed hostilities between the US and Iran bring the Brent to over $106. The biggest tail risks are the US Economy falling into a recession (15% chance in the next 12 months), resurging inflation, revenues/earnings/guidance not matching forecasts, a surge in long bond yields coupled with a USD crash, followed by damages done by tariffs/government policies, adverse geopolitical outcomes, and valuations (high multiples).

Major market events 14th – 18th September 2026

Economic data highlights of the week

Mon: IN – Holiday, JP Industrial Production (7/26), CH PPI (8/26), IN CPI (8/26), CA CPI (8/26), EU ECB President Lagarde Speaks

Tue: CN Industrial Production (8/26), CN Unemployment Rate (8/26), UK Unemployment Rate (7/26), FR CPI (8/26), SP CPI (8/26), DE ZEW Economic Sentiment (9/26). EU ZEW Economic Sentiment (9/26), US ADP Employment Change Weekly

Wed: JP Trade Balance (8/26), UK CPI (8/26), EU Industrial Production (7/26), US Retail Sales (8/26), US Atlanta Fed GDPNow (3Q26), EU ECB President Lagarde Speaks, US Fed Interest Rate Decision

Thu: EU CPI (8/26), UK BoE Interest Rate Decision, US Philly Fed Manufacturing Index (9/26), US Initial Jobless Claims, US Fed’s Balance Sheet 

Fri: JP National Core CPI, JP BoJ Interest Rate Decision, UK Retail Sales (8/26), DE PPI (8/26), EU ECB President Lagarde Speaks, US Industrial Production (8/26)

Performance Review

Source: Google

InflectionPoint reports:

* Last week, there was more of the same – no respite from the global bond rout, with yields continuing to go up. This week is particularly important because it will hold the interest rate meetings of three of the world’s most important central banks: the Fed, the BoE, and the Bank of Japan. Two of them are poised to hike, with the BoE being the exception and staying put for now. Before I delve into rates, I would like to discuss why, in my opinion, 2026 is not 2022, and why rates are likely to stay higher (but it is of paramount importance to reduce the speed at which they are continuing to grow, just like the gamma in an option). 2022 saw many coordinated hikes to reduce the massive inflation brought by the end of the pandemic: it is, in recent terms, the most painful year to remember, as both fixed income and equities were down. In 2026, the drivers are different: certainly the price of oil boosted by the conflict in the Middle East, but also a resilient economy, particularly in the US, which allowed the country to thrive in the face of perhaps the biggest energy shock ever (compared to 1973), and finally, the most contentious point: ever rising government deficits. Also, the new Fed under Chairman Warsh, wants to give the market fewer datapoints on what the FOMC committee is thinking, leaving the market free to make its own assumptions about inflation and future rates. This approach, it must be said, significantly increases volatility, which is one reason why Investment Banks will likely continue to thrive. On top of all that, 2026 will be known as the year of the ‘stabilisation’ of Japan, which has now definitely passed from deflation to inflation. The market, being an outstanding discounter, probably won’t have a great reaction on the Fed and BoJ hikes; what counts the most is the path forward, and how committed are they to really put inflation under control, noting that the ECB was the first to move. Goldman Sachs argues that higher yields are here to stay, driven by deficits, and while oil’s rise (now over $100) can be countered (so much for the ‘forever war’ many are forecasting), it is much harder to do so for the former. The prospects for Japan’s (and maybe the World’s) bond yields rests firmly tied to the decisions of the Bank of Japan, which will meet three more times before the end of the year. While far from certain, a 25bp hike in each of these sessions, or a jumbo hike in September, would certainly tell markets that the Japanese mean business, albeit lately. Discussions at the highest levels about the death of ‘Abenobics’ and the transition to ‘Takaichinomics’ are also taking place. The bad week for the Japanese Stock Market, hurt by the climb of the Yen, does not surprise me; there will have to be a rebalancing between bonds and equities in the country if the BOJ executes on its plan. If it doesn’t, then it’s more of the same: global yields up, stock markets likely up, and the Yen down, and the baton passes to the Fed of the enigmatic Chairman Kevin Warsh to save the world, possibly after the mid-term elections. (I am deeply indebted to my friend Carlo Mogni for putting together this scenario). As for the Fed, it is becoming clearer that, at this point in time, the dual mandate of price stability and full employment is heavily tilted towards the former, and this brought the market to reprice risk. I will look with great interest at the BoE to see for how long it can hold on, with the risk of getting critically late to the party (and the long gilts are already paying a steep price). September is usually a very tricky (=negative) month for global equities. My personal sense is that investors will be wary of increasing risk until there is more clarity on how high will sovereign yields go, with some expecting that the 10-year Treasury will top 5%; but we are already there. As I said before, the level is certainly very important, but the speed and the trend certainly matter, too.  The conflict in the Middle East remains messy, with a negative development of the Houtis gaining control of the Red Sea, with the possible closure of the Bab-al-Mandeb strait on top of Hormuz. Brent spiked to above $100, as there was no tangible progress in the unlocking of the 7 months-long escalation. No matter how you look at them, yields are rising everywhere, often to a level never seen before, sending bonds crashing. This is a problem to which the current oil crisis due to the war in the Gulf definitely contributed, but it is also a function of recurring inflation. To that end, the CME FedWatch tool is forecasting not one, but two hikes by the end of December. The S&P 500’s multiple has declined to 19.1x last week, putting it below with the 5-year average of 19.8x, and just shy of the 10-year average at 19.0x, albeit with the exception of superior earnings growth at present. The lesson from the dot.com boom (and crash) is: watch the profits. With capex ever rising even for the largest companies, investors keep checking whether there are sound returns on their investments, with virtuous companies rewarded and those less so sidelined. I continue to remain optimistic on earnings and on the continued climb of the leading US Indexes, barring major shocks from policy, inflation, and geopolitics. Anthropic might become public as soon as this October, with a $2 Tn valuation. and wants to raise $10 Bn in debt before the IPO. There is an additional headwind that the market faces: both Anthropic and Open AI CEOs are pushing back against the development of AI models, saying that things could get out of control easily. It put them at odds with the US Administration, with President Trump stating that winning the AI race (against China) is of paramount importance. The new issues from hyperscalers are giving sovereigns a run for their yields, unfortunately, and dominating the attention of market pundits. Oracle did surprise positively last week, not least by maintaning unchanged its capex for 2027, but at the moment this is not getting a lot of attention, unfortunately. The present 2026 target for the S&P 500 is 8,000 for Ben Snider of Goldman Sachs, underpinned by a 24% growth in earnings to $340 for 2026, a massive upgrade from $309 previously, and more in line with FactSet bottom line calculations. He foresees the leading US Index rising to 8,800 by the end of 2027, and he’s not even the most bullish strategist on the street, as usual bears Morgan Stanley, and Yardeni Research have a target of 8,300 by the end of the current year. The forecast for 2027 EPS is $385, and the FactSet bottom up forecast is now above $415, making another upgrade likely at some point if the positive trend continues. And we have just seen two quarters of spectacular earnings; while the fourth will fall within 2027, there is still one quarter (3Q26) to go.  Opting for a very late downgrade of  bonds to hold, given the current run up in yields; some value might well be there, but it is very difficult to see it at the moment, in the midst of significant political issues and of a global move to the right (Germany being the last to pay its price. Hence: still keeping equities to buy (with the famous 3% weekly stop), keeping US bonds to hold, and downgrading European bonds to hold. Valuations matter: Japan has really impressed with its performance this year, and it would be well worth considering to include the Asian country in portfolios, but I still recommend hedging the JPY. I believe that the interventions, however massive, cannot be a long term solution unless the Bank of Japan significantly hikes its 1% rate. PM Takaichi recently put forward a bill that would cut tax on food to 1% from 8% from 1 April 2027, for a duration of 2 years, as a temporary fix for the cost-of-living crisis PM Burnham is so desperate to tackle in the UK. Bond yields have been creeping up, sometimes dangerously, on expectations of a move of the BoJ to bring interest rates beyond 1%. Any case it goes, it’s a ‘brave new world’ for Japan, as the last 30 years of policy and deflation/low inflation are completely wiped out; a potential hike to a level of 1.25% would bring the country back to April 1995, when its central bank was easing following the asset bubble of the 1990s. Finally, a word on Italy, whose FTSE MIB Index managed to grow above 50,000 points, a target set in the fateful 2000. While overall growth remains slow, companies are faring much better, thanks to markets diversification, and are bringing the Italian know-how to the world. I am expecting this positive trend to continue, and certainly to outperform the broader Euro Stoxx 50 index. It’s been a good couple of years, but the party’s not over (yet). Obviously, for the country to thrive, the global markets ought to do well, too. 

* After a 2Q26 growth of 1.5%, GDP forecasts for 3Q26 are good, with the Atlanta and New York in agreement on a positive direction. The current P/E ratio of 19.1x is below the average P/E ratio of the last 5 years at 19.8x, but slightly above the 10-year average at 19.0x. As the multiple held throughout 2025, I believe that it should hold over the next 12 months, if the economy performs similarly and there are no major geopolitical displacements; it is the same assumption I had back in 1999, when the multiple was 24x. That multiple level lasted for the good part of almost two years, and despite the fall in 1H00, technology stayed strong through the summer, until the Intel preannouncement in September sealed their demise and gave way to 2 years of bear market. One of the major differences of the current cycles relative to the dot.com boom is that then many companies were thriving on expectations of future sales and no earnings, now companies, even start-ups (Palantir did raise to the challenge with an accelerating 19% quarter on quarter revenue growth, up from 16% in 1Q26) do have tangible revenues and earnings, so the market is on a much sounder footing now than then. One source of worry is represented by the very high yields on global debt, caused in part by a sticky, recurring inflation: the World’s Central Banks will have to come to the rescue by increasing interest rates. However, with the S&P 500 clocking 25%+ earnings growth for 3 quarters in a row (3Q26 is an estimate), eventually it will shine even if it will have to navigate a few rate increases. A very influential voice, such as that of Goldman Sachs’ CEO David Solomon, said that AI will lead to opportunities, as well as inevitable job losses, and was painting a rosier picture of this new technology. After the Space X listing, Anthropic is in a pre-IPO phase, and appointed Morgan Stanley and Goldman Sachs for leading roles in its offering, and with a potential debut on the Nasdaq in mid October, and a success of one of the most hyped companies ever is important to lead the markets higher. Open AI, on the other hand, has recently said it won’t seek an IPO in 2026. 

*  The Federal Reserve was on hold at the end of July, and kept the rate to 3.50-3.75%, albeit with three dissenters who would have preferred a 25bp hike. It is now expected that the FOMC, under the guidance of new Chairman Kevin Warsh, will raise rates in September, which is understandable given the strength of the US economy and the threat of inflation, given that the disinflation which was expected did not quite materialise. They will have access to one more entire set of data (September labour report, CPI, PPI and Core PCE Price Index) before they meet again.  Even though Goldman Sachs and Morgan Stanley call for no rate hikes this year, I still think that a 25bp hike wouldn’t necessarily derail the positive trend so far. However, we might be looking at 50bp of increases this year alone, and what’s most important is the speed at which the Fed will raise rates. I wonder if all this growth we are seeing in 2026 so far has been the result of the Fed’s decision to lower rates by 175bp in the last two years. We need (lower) yields and (higher) earnings to support some of the highest multiples since my heyday (the fated 1999-2000), but it is increasingly difficult to get these not just in the US but throughout the world, given that the yields problem is currently dominating headlines. 

* Yields on US 10-year Treasuries have reached 4.96%, very close to the fated level of 5%, and were up once again last week, in line with European government bond yields. While in 1999 they were even higher, and the Fed was hiking, not easing, we definitely need yields to stop continuing to grow to have a more constructive scenario. We seem to be on a struggle to get there; and on top of this I cannot yet recommend the US Debt on their public spending plans. Furthermore, I have stopped recommending European Debt on this dramatic yields increase, which seems to be driven by investors fleeing fixed income as an asset class. Legendary investor Jeffrey Gundlach said that there might even be a haircut on US Treasuries, which never happened before. The potential opening of a sovereign crisis is something that must absolutely avoided. The US Deficit is currently about 6% of GDP and neither the Republicans nor the Democrats want to reduce it. Higher borrowing costs will be felt across the balance sheets of most states, potentially further reducing growth. Regarding earnings, I continue to remain optimistic, particularly on technology (the main driver for the S&P 500). Ben Snider, who has taken up his post as Chief US Equity Strategist from legend David Kostin, has a bullish forecast of $340 per share for the S&P 500 by the end of the year, with a target price of 8,000, and $375 for 2027, with a target price of 8,800. At the moment, the bottom-up forecasts are well ahead of both his 2026 and 2027 targets. Earnings for 2026 are continuing to rise to a level of $362.03 per share, while for 2027 they are seen at $416.53 (significantly ahead of GS’ own forecast at $385). In both cases, the earnings’ forecasts puts both of them on a significantly higher level than just one year ago, to the tune of 17% increase on a YTD basis. These could be revised even higher should 3Q26 earnings impress and beat forecasts once again.

Source: FactSet

* The US GDP for 2Q25 came in at 1.5% according to the latest estimate. The Atlanta Fed GDPNow model forecast for 3Q26 is in positive territory, with a current reading of 4.4%, down from 4.7% last week. It is well above the Blue Chips consensus, which are presently at 2.5% and raising. Last quarter, the Atlanta Fed’s model was the one closest to the actual GDP results. The New York Fed’s Nowcast model, which is less volatile, has its current forecast is 2.26%, stable from last week. I believe it is prudent to make an average of those two forecasts to get to the real number. Introducing a forecast for 3Q26, with earnings expected to climb by 28.7%. compared with a forecast of 26.6% as of June 3oth, with revenue growing by 11.9% vs 10.9% as of June 30th. It is very important to note that analysts have been increasing numbers for 3Q26, even after the impact of the war, while usually they would cut them at this point down the quarter. For 2026, earnings growth is forecasted at 31.6% vs 23.9% as of June 30th, with revenue coming in at 12.1% vs 10.8% as of June 30th. Introducing a new forecast for 2027, earnings growth is forecasted at 15.1% vs 17.4% as of June 30th, with revenues coming in at 9.1% vs 8.1% as of June 30th. Finally, it’s worth noting that the chance of a recession in the next 12 months, as calculated from the yield curve, according to the Federal Reserve Bank of Cleveland, is presently (July 2027) 12.27%. The peak was 68.76% in April 2024, and it was the only time since 1960 in which a recession did not materialise, given such a forecast. The current level is below economists’ current forecasts: a 15% chance of a recession in the next 12 months.  

Source: Blue Chip Economic Indicators and Blue Chip Financial Forecasts; Federal Reserve Bank of Atlanta

Source: Federal Reserve Bank of New York, New York Fed Staff Nowcast

Source: Federal Reserve Board, Federal Reserve Bank of Cleveland, Haver Analytics

Earnings, What’s Next?

The reporting season for 2Q26 is now ending. Here’s a list of companies reporting this week.

Source: Earnings Whispers

Market Considerations

Source: BCA Research, FactSet, S&P Global, ISABELNET.com

Source: Datastream, I/B/E/S, Goldman Sachs Global Investment Research, ISABELNET.com

Source: JP Morgan, Bloomberg Finance L.P., ISABELNET.com

Revenue growth estimates for 2026 are forecasted to grow by 12.1% (10.9% on June 30th), and earnings growth estimates for 2026 are predicted to grow by 31.6% (23.9% on June 30th), so the future looks bright. Introducing forecasts for 2027, which sound again very positive, with revenue to grow by 9.1% (8.1% on June 30th) and earnings to grow by 15.1% (17.4% on June 30th). Due to rising, persistent inflation, all central banks are in a tightening mode. Certainly, a positive development in the Middle East conflict could put a cap on how much they will raise. However, rising yields seem to be out of control, and the world’s central bankers need to send a strong message that they are still in the driving seat.

Three highlights this week. The first chart, from BCA Research, shows the difference that there is between the rise of the market in the dot.com boom and the present one. It highlights the importance of earnings versus hopes or perspectives for the future that were washed out by the famous Intel preannouncement. There are a couple of worries: the first is this exceptional earnings growth may fade in 2027; and the second is related to the future development of AI, now hanging over Wall Street after Dario Amodei’s post. Anthropic is the first company which has to show that it can turn its huge investments into profits, and that slowing the path of development won’t significantly slow its steep growth so far. The second chart, from Goldman Sachs, shows that in 2026 analysts have had to raise estimates multiple times, as earnings were systematically beating forecasts, and not just on the S&P 500: other important markets, such as Europe and Japan, also benefitted of such upgrades. The third chart, from JP Morgan, focuses on the rise of real 10-year yields in the US, which means that the relative valuations get more expensive, and the markets can only count on earnings in order to go higher. In September we have witnessed a multiple contraction of 1x in spite of a supportive background; this is another headwind for both equity and fixed income markets.

For equities, be careful not to fall into ‘Buffett’s trap’. He famously said that there were moments when Berkshire Hathaway’s stock was down more than 50%, and nothing was wrong with the company at the same time. Timing and risk management are key. I remain optimistic in the long term; I have faith in the new CEO, but to follow the Oracle means filling very, very big shoes. It appears, however, that the legendary Chairman is still providing his ideas, particularly when trading stocks: the $10 Bn position in Alphabet was his idea. The late Angelo Abbondio, a legendary Italian investor, used to say that you can rely on fundamental analysis and on technical analysis, but the most difficult thing was to decide when to prioritise the first and when the second. In general, no stock can outperform all the time; some volatility has to be expected. Those who performed better earlier may not perform so well later.

Due to the persistent stickiness of inflation, monetary policy is again taking centre stage. Obviously, we should not overlook geopolitical scenarios in Ukraine and the Middle East: this will dominate the news for a while. Any further escalation would be negative for oil and for the markets.  

I now recommend a long position in equities and a neutral position on US bonds, and of EU Bonds. I’m still suggesting putting together a portfolio that focuses on the safety of German Bunds, but unfortunately Germany is not without issues, as the recent political elections in Saxony show, even though the stock of its sovereign debt at around 60% is the lowest in G7 countries. At the moment, even though some European yields are appealing (my preference is to look for nominal yields around 4% in countries with an investment grade credit rating), I would refrain to make investments in the long term because I cannot yet see the end of the so far unstoppable rise in sovereign yields. 

There are four main headline risks to what is otherwise a constructive view for 2026: i) revenue/earnings/guidance not matching forecasts, particularly in technology; ii) any damage to the economy and trade done from Trumponomics, tariffs, increasing sovereign yields, and resurging inflation; iii) any negative geopolitical outcome (which could see an expansion of the current conflicts); and iv) valuations, which are nearing levels only seen once before (at least during my lifetime!). 

Japan continues to lead major global markets with a great performance YTD. The Bank of Japan is in a very tricky position, like the Fed was not so long ago. It would need to raise rates to counter inflation, but the weak growth may prevent it to do so. That might turn in a further weakening of the JPY. Watch out the long bond yields, particularly the 30y and 40y, as they react to increased government spending. I am now positive on the country, although I would definitely hedge the JPY. While the BOJ raised rates to 1% in June, the highest level in 31 years, it is seen as behind the curve, which is why – barring interventions – the JPY is continuing to fall, especially vs the USD. Now the BoJ will be forced to raise rates by 25bp on Friday, but the message will be more important that the move, and this will directly impact the JPY. Were it to raise further and go below 150 vs USD, then I would have to reassess my stance on the Topix.

Portfolios

Finally, I want to introduce four portfolios that Tom and I published on Wikifolio. Tom’s a multi-asset portfolio, whereas the one I manage (with substantial input from Tom) is a global income and growth with a heavy US tilt. The third one is on Italian Equities. The fourth and latest one is on Japanese Equities. Check them out!

https://www.wikifolio.com/en/int/w/wf00inf8ig

Tom’s Multi-Asset Portfolio is up 32.4% in 2 1/2 years, with a Sharpe Ratio of 1.1

https://www.wikifolio.com/en/int/w/wf000ipggi

Our Global Income and Growth Portfolio is up 38.9% in 2 1/2 years, with a Sharpe Ratio of 0.7. Obviously, the devaluation of the USD had a big impact as all stocks are priced in EUR

https://www.wikifolio.com/en/int/w/wf00ipiteq

My Italian Equities Portfolio is up 89.5% in 2 years+ and has outperformed the FTSE MIB Index by 2830+ bp in this timeframe, with a Sharpe Ratio of 1.7

https://www.wikifolio.com/en/int/w/wf00ipjpeq 

My Japanese Equities Portfolio is up 12.1% in about 12 months. Obviously, the devaluation of the JPY had a big impact as all stocks are priced in EUR.

Consulting

Finally, I have officially become an Italian Independent Financial Consultant (Consulente Finanziario Autonomo), registered with the Italian OCF since 19 March 2024 (protocol 2425). If you are interested in my financial advice or simply for more information, please contact me at gvintani@gmail.com

Consulting accounts usually start from EUR 100,000. Please note that you should be based in Italy to avail yourself of this service. If you are interested, please feel free to drop me an email. I am happy to send you my presentation and track record upon request.

Happy trading, and see you next week!

InflectionPoint

Disclaimer

All views expressed on this site are my own and do not represent the opinions of any entity with which I have been, am now, or will be affiliated. I assume no responsibility for any errors or omissions in the content of this site, and there is no guarantee for completeness or accuracy. The content is food for thought, and it is not meant to be a solicitation to trade or invest. Readers should perform their own investment analysis and research and/or seek the advice of a licensed professional with direct knowledge of the reader’s specific risk profile characteristics.