The Fed rises rates by 25bp and mentions another 25bp hike this year, but expects to be on hold in 2027; markets disagree, and see 2 more hikes in 2027. The BoE was on hold, but a hike in November is on the cards. The BoJ hiked by 25bp with two dissenters, leaving all options open for the last two meetings of the year. 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 $103. Finally, Anthropic may delay its IPO to after the midterm elections. 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 21st – 25th September 2026

Economic data highlights of the week

Mon: JP – Holiday, CN PBoC Loan Prime Rate (9/26), EU ECB President Lagarde Speaks

Tue: JP – Holiday, EU ECB President Lagarde Speaks, US ADP Employment Change Weekly

Wed: JP – Holiday, SG CPI (8/26), FR Manufacturing PMI (9/26), FR Services PMI (9/26), DE Manufacturing PMI (9/26), DE Services PMI (9/26), EU Manufacturing PMI (9/26), EU Services PMI (9/26), UK Manufacturing PMI (9/26), UK Services PMI (9/26), US Manufacturing PMI (9/26), US Services PMI (9/26)

Thu: SK, ZA – Holiday, JP Services PMI (9/26), CH SNB Interest Rate Decision, DE Ifo Business Climate Index (9/26), US Initial Jobless Claims, US Fed’s Balance Sheet 

Fri: CN – Holiday, SP GDP (2Q26), UK BoE Governor Bailey Speaks, US Atlanta Fed GDPNow (3Q26)

Performance Review

Source: Google

InflectionPoint reports:

* Last week was dominated by news coming from three of the world’s leading central banks: the Fed, the Bank of England, and the Bank of Japan. Washington rose rates by 25bp, as expected, and announced one more 25bp hike before the end of the year, but expects to stay on hold for much of 2027. London stayed put, but Governor Bailey announced that a rate hike is imminent, and might well happen at the next meeting in November. Tokyo rose rates by 25bp to 1.25%, with 2 dissenters, which might well mean that its central bank might stay put at the next meeting in October. So what all of this meant for the soaring bond yields? Well, they rose again, with the 10-year Treasuries closing in just shy of the feted 5%, albeit by a smaller measure than in recent weeks. Notable was France’s 10-year OAT spread opening up vs all the other major European countries. There might be two components to watch in the rise: economic activity, and inflation. The latter has certainly increased beyond what was expected, in part as a function of the ongoing war and the resulting energy crisis, and possibly in the US in part as a result of strong economic output, with the Atlanta Fed GDPNow forecasting an increase of 5.1% for 3Q26. There has been much talk on how the rerating of US yields from 400-450 to 450-500 will impact stocks: certainly it will cap the multiple. This is something that we have already observed, with the S&P 500 moving from 21-22x to 19x where it sits now. However, estimates for earnings growth in 3Q26 continue to grow, with a current forecast of 28.6%. I personally feel that the Fed has reasserted its authority in the face of the bond markets, and therefore yields, in the US, should stop going higher and higher (although I am still not recommending to initiate a position in long treasuries). Europe is more of a riddle, and I think the bloc is plagued more by political problems which are not going to go away soon, rather than by economic data. Certainly this is the continent hit the hardest by the ongoing war in the Middle East, but the result of the elections in Germany, and the upcoming elections in France and in Italy (early 2027, and late 2027, respectively) always give a sense that the bloc’s resilience might diminish, with potential devastating consequences as a result. Nevertheless, I still think that 2026 is not 2022, and 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. Regarding the ‘stabilisation’ of Japan, which has now definitely passed from deflation to inflation, there are two forces at play. The domestic one, led by PM Takaichi, is championing a dovish approach, with reduced rate hikes, while the external one, led by Secretary to the Treasury Bessent, favours a sharp rate hike in order to address the spread that the Asian country has with the rest of the world, and bring new life into the JPY. 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 two more times before the end of the year. While far from certain, a 25bp hike in each of these sessions, 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. Obviously the JPY and the Topix are tied together – a weak currency sends the stock market higher, while a stronger currency is seen as a major headwind. The resulting outlook is 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. 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%. 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 a Saudi Arabian pipeline.  Brent spiked to above $100, as there was no tangible progress in the unlocking of the 7 months-long escalation, but ended the week down, just above $103. No matter how you look at them, yields are rising everywhere, often to a level never seen before, sending bonds crashing. The S&P 500’s multiple has remained stable at 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. Open AI mentioned that it won’t appy for an IPO this year, sending shares of key backer SoftBank tumbling. 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. Still keeping equities to buy (with the famous 3% weekly stop), and keeping 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. 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. Furthemore, the current cycle of hikes is the fastest since 1990. 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, but now 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 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 November, 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 unanimously decided to raise rates by 25bp at the September meeting, and brought the rate to 3.75-4.00%.  It is now expected that the FOMC, under the guidance of new Chairman Kevin Warsh, will raise rates one more time before the end of the year, either in October or in December, 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. What’s most important is the speed at which the Fed will raise rates; while Chairman Warsh said the bank will be on hold in 2027, the market disagrees, forecasting two more hikes next year on top of the one in 2026, bringing the official rate in December 2027 to 450-475. 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 4.99%, 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 $362.41 per share, while for 2027 they are seen at $417.35 (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 5.1%, up from 4.4% 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 2.33%, up from 2.26% 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 28.9%. compared with a forecast of 26.7% 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 31.9% vs 24.0% 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 15.2% 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: Datastream, STOXX, Goldman Sachs Global Investment Research, ISABELNET.com

Source: EPFR Global, Haver Analytics, Deutsche Bank Asset Allocation,  ISABELNET.com

Source: Goldman Sachs Global Investment Research, ISABELNET.com

Revenue growth estimates for 2026 are forecasted to grow by 12.1% (10.8% on June 30th), and earnings growth estimates for 2026 are predicted to grow by 31.9% (24.0% 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 15.2% (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 Goldman Sachs, highlights that for all major markets, earnings have been the main component (with dividends) of the rise, while P/E multiples offered a negative contribution. It is quite possible that this reduction has been engineered by the ever increasing b0nd yields. That said, with the P/E of the S&P 500 almost in line with the average of the last 10 years, and strong earnings to follow, the market can keep looking higher, possibly after the midterm elections. The second chart, from Deutsche Bank, shows that while in 2026 equity flows have been super strong, bond yields were resilient despite rising yields, painting a different picture to that of fleeing fixed income as an asset class. The third chart, again from Goldman Sachs, focuses on the capex forecasts of the hyperscalers in the US and in China, which shows a wide difference in favour of America. The 2027 forecast, set once at $1 Tn, has already moved to $1.2 Tn – it seems that developing AI is also a race of building computing power. Next year, we might well add Anthropic and Open AI to that list.

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 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 was forced to raise rates by 25bp last Friday, but the message was mixed, and future rate hikes cannot be given as granted this year. 

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 33.1% 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 41.0% in 2 1/2 years, with a Sharpe Ratio of 0.8. 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 86.6% in 2 years+ and has outperformed the FTSE MIB Index by 2540+ bp in this timeframe, with a Sharpe Ratio of 1.6

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

My Japanese Equities Portfolio is up 10.5% 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 on Monday or Tuesday 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.