Equities’ pain continues – the Nasdaq 100 is now in a correction. The US midterms take place today – Democrats to win the House, and possibly also the Senate. The BoE will hike on Thursday, putting all major Central Banks (except for the SNB) in a tightening mode. Oil down as Iranians apparently show willingness to talk – Brent at $107. Sovereign yields get a respite from selling, with the US and Germany in the lead; France trails due to the size of its debt and upcoming elections. Nonfarm payroll on Friday may influence the Fed’s outlook for 2027. Earnings for 3Q26 have brought mixed results so far, with Mag 7 so far unable to deliver a positive surprise the sector desperately needs. 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, and adverse geopolitical outcomes.

Major market events 2nd – 6th November 2026

Economic data highlights of the week

Mon: BR – Holiday, DE Retail Sales (9/26), FR Manufacturing PMI (10/26), DE Manufacturing PMI (10/26), EU Manufacturing PMI (10/26), UK Manufacturing PMI (10/26), US ISM Manufacturing PMI (10/26), US Atlanta Fed GDPNow (4Q26)

Tue: JP – Holiday, AU RBA Interest Rate Decision, CH CPI (10/26), US Manufacturing PMI (10/26), US JOLTS Job Openings (9/26), US Factory Orders (9/26)

Wed: CN Caixin Services PMI (10/26), FR Services PMI (10/26), DE Services PMI (10/26), EU Services PMI (10/26), UK Services PMI (10/26), EU CPI (10/26), US ADP Nonfarm Employment Change (10/26), US Services PMI (10/26), US ISM Non-Manufacturing PMI (10/26), JP BoJ Monetary Policy Meeting Minutes

Thu: JP Services PMI (10/26), EU PPI (9/26), UK BoE Interest Rate Decision, UK BoE Governor Bailey Speaks, US Initial Jobless Claims, EU ECB President Lagarde Speaks, US Fed’s Balance Sheet 

Fri: JP Services PMI (10/26), DE Industrial Production (9/26), US Nonfarm Payrolls (10/26), US Unemployment Rate (10/26), US Average Hourly Earnings (10/26), JP BoJ Governor Ueda Speaks

Performance Review

Source: Google

InflectionPoint reports:

* Many different themes played out last week. The first I’d like to talk about is the demise of the AI trade, with investors wishing to see its massive investment turn into cash. October was the worst month for the Nasdaq since March 2025, with particular angst regarding hyperscalers’ capex. The most recent earnings from Magnificent 7 were mixed at best, and many (Alphabet, Amazon) traded down after them. Anthropic is finally out with its S-1, but with no indications about number of shares sold (and by whom) and price range. So far, it was semiconductor companies which reaped the most benefits from the massive AI capex cycle; and probably they (capex and stocks) have reached a tipping point. This is possibly a function of this chart from J.P. Morgan regarding the evolution of cloud capex:

Source: J.P. Morgan Cloud Capex Dataset, Bloomberg Finance L.P., ISABELNET.com

After 2027 the buildout of data centers will slow meaningfully, and I believe the market is 1) being unable to grasp Anthropic’s stellar growth and make a reliable projection for the future, given its massive growth, of as much 40%+ quarter on quarter; 2) appraise in which inning of the AI buildout are we. Therefore, the puke on stocks which have done well, potentially to levels last seen in 2025. I do think that Anthropic becoming public will much benefit investors, as they will have to provide much more information to the market – and I wonder what they are going to do in terms of guidance. It is absolutely crucial that the deal goes well for the markets, and particularly for the Nasdaq, so hopefully it will be sensibly underpriced considering the massive valuation that the company is demanding. How can you filter information from the noise? I would still look at fundamentals and at multiples, bearing in mind whether the decline may have temporary or permanent repercussions for the future. Another of last week’s major themes, was the bond market and central banks. The good news is that markets are functioning perfectly: yields declined as investors returned to the safety of fixed income and away from equities. Inflation is still a threat (we’ll get an update on EU CPI this Wednesday, and the forecasts are as high as 4%), and the price of oil higher for longer, with the world waiting to see what (if anything) will happen after the US midterms tomorrow, with the Democrats forecasted to take control of the House, and possibly of the Senate, which would be a drawback for President Trump. I think it’s safe to say that all central banks are now in a tightening mode, albeit with a different sense of urgency. The BOJ did not hike last Friday, but will probably do it again in December, taking rates to 1.50%, and then by being data dependent; the Fed did not hike in October and will in December, but the current numbers point to fewer hikes in 2027; unless inflation comes down meaningfully, the ECB will have to hike again in December; and the BoE will hike on Thursday. The big uncertainty is how the war in the Middle East will unfold; the situation got worse since the Houthis stepped up their attacks on Saudi Arabia. At the moment the market is not counting on any meaningful improvement any time soon, and the biggest energy crisis since 1973 is continuing. France is still showing elevated rates because of inactivity from President Macron, even though 10-year rates are below 5%; this is likely to continue until the elections in April 2027, unless they are brought forward due to the President’s resignation. The focus appears to be on excessive deficits; Governments are now required to increase their defence spending at the cost of reducing welfare, which citizens are fighting. This is a global problem, and many blame Japan’s low rates for it; to show that it means business, the BoJ should hike once again before the end of the year. The ‘problem’ is that the outlook for December 2027 sees 1 more hike beyond the one in December 2026, versus a Fed which is supposed to stay put.  Nevertheless, I still think that 2026 is not 2022, and rates are likely to stay higher for longer(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. Anyway, Goldman Sachs advocates for fewer rate hikes than currently priced by the markets. I continue to remain optimistic on earnings growth and on the continued climb of the leading US Indexes, barring major shocks from policy, inflation, and geopolitics. There has been an update regarding a new, 12-month target by Ben Snider of Goldman Sachs, in which the strategist updated his top down forecast on earnings to the higher levels indicated by the bottom-up approach. with forecasts of S&P EPS raised to $415 from $385 previously, and to $460 in 2028, highlighting (and I completely agree with his approach) that it will be earnings, not multiples, to drive the market higher, to 8,700 by the end of September 2027, with an average multiple which is consistent with the current market multiple (around 19x). AI Capex is still a very important driver for S&P 500 EPS, so watch it closely, but the companies must have a return on their investment, too. 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. I believe that the interventions, however massive, cannot be a long term solution unless the Bank of Japan significantly hikes its 1.25% 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. The current cycle of hikes is already the fastest since 1990, and it might be not over yet. 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. European stocks in general had a very difficult couple of months, also due to the riots, but I am still positive. 

* After a 3Q26 growth of 3.4%, GDP forecasts for 4Q26 are good, with the Atlanta and New York in agreement on a positive direction. The current P/E ratio of 18.7x is below the average P/E ratio of the last 5 years at 19.8x, and the 10-year average at 19.1x. The multiple has been coming down from as much as 23x late last year as yields rose, and only an incredible run in earnings allowed the index to make further progress while its multiple contracted. One of the major differences of the current cycle 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 20% quarter on quarter revenue growth, up from 19% in 2Q26) 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 filed its S-1, and appointed Goldman Sachs and Morgan Stanley with leading roles in its offering, and with a potential debut on the Nasdaq before the end of the year, and a success of one of the most hyped companies ever is important to lead the markets higher. It has announced 3Q26 revenue of $16.8 Bn, and a LTM revenue run rate of $67.2 Bn, with the prospect of reaching $100 Bn in annual run rate after 4Q26. 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 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. We will witness the October labour report on Friday, but any indication has to be confirmed by the subsequent CPI and PPI to change materially the outlook for the US Central Bank. I further note that the Core PCE Price Index at 3.1% was in line with expectations and ahead of 3.0% in August. 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 one more hikes next year on top of the one in 2026, bringing the official rate in December 2027 to 425-450. 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.  

* Yields on US 10-year Treasuries have reached 4.91%, and declined last week, in line with European government. 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 $415 per share for the S&P 500 in 2027, with a target price of 8,700 in 12-months, while the most recent bottom up forecasts see 2027 earnings at $423.90 and this level is likely to rise further after the 3Q26 report.

Source: FactSet

* The US GDP for 3Q25 came in at 3.4% according to the first estimate, which matched perfectly the forecast of the Atlanta Fed. Its GDPNow model forecast for 3Q26 is in positive territory, with a current reading of 3.2%, stable from last week. It is well above the Blue Chips consensus, which are presently just below 2% and declining. The New York Fed’s Nowcast model, which is less volatile, has its current forecast is 2.90%, up from 2.81% 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 30.2%. compared with a forecast of 29.1% as of September 3oth, with revenue growing by 13.4% vs 12.2%. 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 32.9% vs 32.2% as of September 30th, with revenue coming in at 13.0% vs 12.4%. Introducing a new forecast for 2027, earnings growth is forecasted at 16.3% vs 15.4% as of September 30th, with revenues coming in at 9.6% vs 9.2%. 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 (September 2027) 10.65%. 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 3Q26 is now continuing. Here’s a list of companies reporting this week. Highlights include: Apple and Palantir (Monday, After Close), and AMD (Tuesday, After Close). 

Source: Earnings Whispers

Market Considerations

Source: FactSet, Goldman Sachs Global Investment Research, ISABELNET.com

Source: Bloomberg Finance L.P., Deutsche Bank Asset Allocation, ISABELNET.com

Source: Compustat, FactSet, IBES, Goldman Sachs Global Investment Research, ISABELNET.com

Source: FactSet, Goldman Sachs Global Investment Research, ISABELNET.com

Revenue growth estimates for 2026 are forecasted to grow by 13.0% (12.4% on September 30th), and earnings growth estimates for 2026 are predicted to grow by 32.9% (32.2% on September 30th), so the future looks bright. Introducing forecasts for 2027, which sound again very positive, with revenue to grow by 9.6% (9.2% on September 30th) and earnings to grow by 16.3% (15.4% on September 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.

Four highlights this week. The first chart, from Goldman Sachs, shows the current targets for the S&P 500 – 8,000 by the end of this year, and 8,700 by the end of next year, driven by earnings. Ben Snider has updated his earnings forecasts to $375 for 2026E, $415 for 2027E, and $480 for 2028E, with the multiple contracting from 19x to 18x. Much will depend on whether the inflation picture will become clearer and 10-year yields will come down; it is prudent, at this point, to see earnings driving growth. The second chart, from Deutsche Bank, highlights the delicate situation of technology in a moment in which the Nasdaq 100 has entered a correction. Around this level of relative underperformance, the sector has bounced 5 times – will there be a 6th or will the upward trend be broken this time? Apparently, Anthropic will begin marketing in the week of November 9 – and a successful placement can certainly inject new life in the battered sector. There was a flight to safety with flows moving to Apple, but the most valuable company in the world did not manage to convince investors after its latest quarterly report. It is therefore very difficult to find a safe place to hide in technology; blame it on the earnings and on the frequent placements to the tune of several billion $ in equity and bond financing (Meta, Oracle). The third chart, again from Goldman Sachs, shows the current valuations across major markets – numbers have come down since the excesses of last year, but they are not low enough to provide a shelter on valuation alone. I think they will continue to come down rather than going up again (possible only if/when the AI investments will pay off and there will be upside to top and bottom line growth). The fourth chart, again from Goldman Sachs, is at the centre of the debate: AI has proven it can deliver revenue (Anthropic’s rapid growth is a great example), but it has not yet proven it does have access to the financing needed for its buildout. PIMCO’s CEO Roman thinks that eventually AI financing will reach $10 Tn in the next five years, a number which is comparable to the size of the corporate/treasury US market. Investors are scrutinising companies cash flows to see if they are spending too much on capex – the chart tells us that 2027 will be another difficult year, but they will bounce back in 2028. 

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 made by him. 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 have returned to the 10-year average, but would not protect the market in case of a slowdown in earnings growth. 

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. Watch out the long bond yields, particularly the 30y and 40y, as they react to increased government spending. However, I am still positive on the country. While the BOJ raised rates to 1.25% in September, the highest level in 31 years, it is seen as behind the curve. It should raise rates to 1.50% by the end of the year, after which it can be more flexible and look at the data, although I personally feel rates should be 2% or more.

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 35.1% 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 41.4% 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 71.7% in 2 years+ and has outperformed the FTSE MIB Index by 2125+ bp in this timeframe, with a Sharpe Ratio of 1.3.

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

My Japanese Equities Portfolio is up 7.2% 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.