Market Watch
Astero Falcon DIFC Limited November 2026
Macroeconomics: US Business Activity Remains Elevated
01
Macroeconomics: Central Banks Continue to Raise Rates
03
US Elections: A Decisive Democratic Victory
04
Equities: A Weak Reaction to the Market Leaders’ Quarterly Results
06
Equities: A Deep Correction in Technology Stocks
08
Direct Investments: Investment Volumes Are Declining
09
October: A Correction Ahead of the US Elections
11
For Professional Clients Only – Not for Retail Distribution.
Macroeconomics: US Business Activity Remains Elevated
01
The September consumer-price index showed
US retail sales and food services reached $745
monthly inflation accelerating from 0.4% in August
billion in September. The monthly increase was
to 0.6%. Gasoline rose by 9.1% over the month
0.8%
and accounted for more than half of the overall
Importantly, the series is not adjusted for price
monthly increase in CPI. Core CPI excluding food
changes, so part of the increase may reflect
and energy rose by 0.3%. Inflation remains
inflation rather than a rise in the physical volume
materially above the Federal Reserve’s 2% target,
of purchases. The US consumer remains an
and
important support for the economy. Without an
continued
increases
in
energy
prices
complicate rate cuts.
According to the September report, nonfarm payrolls rose by only 29,000. The average increase
and
inflation
the
year-on-year
adjustment,
increase
however,
one
6.3%.
cannot
extrapolate that real spending rose by the same 6.3%.
over the previous 12 months was 45,000 a month.
The preliminary S&P Global composite PMI fell
Growth in average hourly earnings slowed to 3%
from 58.4 to 57.6, remaining well above the 50
year-on-year. July and August were also revised
mark that separates expansion from contraction.
down by a combined 60,000 jobs. A weak labour
The new-orders index reached its highest level
market creates a simultaneous risk of lower
since 2021, but price pressures intensified. The
consumer spending and lower corporate profits.
output-prices
Slower hiring raises the probability of monetary
increase since August 2022. Resilient demand and
easing, but inflation does not allow it. The
rising new orders support the outlook for revenues
combination of the next employment and inflation
and corporate profits, but the combination of
prints will matter for the Federal Reserve’s
strong demand and inflationary pressure creates a
outlook.
risk that the Federal Reserve’s policy rate will
indicator
posted
remain high for an extended period.
Source: Bloomberg, Astero Falcon analytics.
its
strongest
Macroeconomics: US Business Activity Remains Elevated
02
US Monthly Nonfarm Payrolls
Since mid-2025 the US labour market has been slowing, but in combination with persistently high inflation this does not yet allow the Federal Reserve to begin cutting rates in earnest.
US ISM Manufacturing PMI
The business-activity index remains above 50, which points to expansion in the US economy and supports corporate profits.
Source: Bloomberg, Astero Falcon analytics.
Macroeconomics: Central Banks Continue to Raise Rates At its scheduled meeting on 28 October the Federal Reserve paused, but did not rule out further rate increases. The policy rate was held at 3.75–4.00%, with two of the 12 voting members dissenting in favour of a 0.25 percentage-point increase.
Market consensus puts the probability of a further rate increase in December at 85%. The US economy is growing at a solid pace, investment and consumer spending are holding up, and the labour market, while slowing, remains stable. Inflation remains elevated and geopolitical uncertainty persists. The Federal Reserve’s assessment of economic activity turned more positive, shifting from “solid” to “strong”. As usual, the Federal Reserve emphasised the need for more data before determining the further path of policy.
Federal Reserve Chair Kevin Warsh continues to reform the structure and strategy of the Fed. From 2027, one of the eight FOMC meetings will be devoted exclusively to monetary-policy strategy, with no vote on the policy rate and no postmeeting statement. In 2028 two strategy meetings and six rate-setting meetings are planned.
03
The main idea of the changes is to reduce the emphasis on communication with investors and on forecasts, and to devote more time to a deeper discussion of longer-term policy. Warsh wants to make the Federal Reserve less dependent on prior promises to the market, to strengthen strategic discussion, and to review the role of the balance sheet in monetary policy. For investors this means they will have to take their cue more from inflation, employment and other hard data.
Other major central banks are also continuing to raise rates. The ECB and the Bank of England are almost certain to raise rates by a further 0.25% before the end of 2026.
The current 2-year Treasury yield is 4.6%, while the Federal Reserve’s policy rate is 4%. The 60 basispoint gap means that the bond market has already fully priced in three additional Federal Reserve rate increases. Despite the September rate increase, the bond market stabilised in October and even rose in price (yields fell from 4.9% to 4.6%). Current bond yields are elevated by historical standards. We conclude that the local peak in yields is already behind us and the negative news is largely fully priced, although the future direction if yields still remains sensitive to inflation, labour-market data and Federal Reserve policy.
US 2-Year Treasury Yield and the Federal Funds Rate
The best guide to the path of the Federal Reserve’s policy rate is the 2-year Treasury yield. Despite the September increase in the policy rate, Treasury yields began to decline in October. We consider that three further Federal Reserve rate increases are already fully priced into current bond prices, and that the local peak in yields is already behind us. Source: Bloomberg, Astero Falcon analytics.
US Elections: A Decisive Democratic Victory In the midterm elections on 3 November the Democratic Party won a decisive victory, taking control of both chambers of the US Congress — the Senate and the House of Representatives. Since the end of the Second World War this has happened only three times — in 1946, 1994 and 2006. As of the morning of 4 November, Democrats had picked up at least seven Senate seats and 25 House seats.
The Democratic Party won a number of competitive districts and made gains even in traditionally Republican states. A Democratic victory effectively means stronger congressional control over the president’s actions. Donald Trump has already said that he will block Democratic initiatives for “a month or two” in the event of a Democratic midterm victory, but is then prepared to make deals.
The election results mean that from January 2027 Washington will enter a period of divided government: the president is a Republican and Democrats control both chambers. Historically, this combination has been the least profitable for the equity market: since 1932 it has delivered an average gain of only 5%, half the average outcome of 11%. Another statistic is also of interest: in the third year of the presidential cycle the S&P 500 has risen by an average of 17%.
Source: Bloomberg, Astero Falcon analytics.
04
Midterm elections are not, however, the only factor, or even the main one, determining US equity prices. In our view, the market’s path depends more on Federal Reserve monetarypolicy decisions, on economic cycles and on the corresponding trends in corporate profits than on actions taken by the White House or Congress. These factors are currently in a state of uncertainty, which in our view has been the cause of the recent volatility in the market.
Democrats may tighten oversight of large technology companies, of spending on AI infrastructure, of data use and of the energy consumption of data centres. That is potentially negative for companies that had counted on the rapid development of AI infrastructure with minimal government intervention. In particular, Tesla and SpaceX shares may correct because of a Democrat taking office in Texas, where Elon Musk’s companies are based.
A Democratic victory in both chambers of the US Congress is a material positive for the renewableenergy sector, whose funding declined under Trump. If Democrats pursue changes aimed at reducing losses of insurance coverage or at easing the cuts to Medicaid funding, that would support demand for healthcare stocks.
US Elections: A Decisive Democratic Victory
05
Average 12-Month S&P 500 Return by Control of the White House and Congress
Historically, the combination of a Republican president and a Democratic majority in Congress has been the least profitable for the equity market, with an average result of only 5% over the following 12 months after midterm elections.
Source: Bloomberg, Astero Falcon analytics.
Equities: A Weak Reaction to the Market Leaders’ 06 Quarterly Results At the end of October the largest US companies released their quarterly results. Google shares fell by 13% after the results, Amazon declined by 7%, and Microsoft was unchanged.
Alphabet’s revenue in the third quarter rose by 25% year-on-year to $128 billion, but earnings per share were $2.12, 26% lower than in the same period a year earlier. The Gemini app reached 1 billion users, and the company presented a new Gemini 4 Carbon model focused on cybersecurity. The main reason for the correction was rising capital expenditure on AI infrastructure, which reached $51 billion (up 114%), with even higher spending planned for 2027 ($195–$205 billion). Free cash flow turned negative for a second consecutive quarter (−$9.1 billion in Q3 2026) and came in below expectations, because of AI spending, an accumulation of tensor processing unit (TPU) inventories, and a fine from the European Commission. After the report the shares fell by 14%, the steepest one-day decline in the company’s history.
Source: Bloomberg, Astero Falcon analytics.
Amazon’s operating results were very strong: in the third quarter the company earned $1.89 per share on revenue of $201.94 billion. Analysts had expected $1.96 per share on revenue of $202.10 billion. AWS revenue was $46 billion, 39% higher year-on-year, the fastest growth rate in almost five years. Nevertheless, the market reacted negatively to the scale of AI investment and the deterioration in free cash flow. Amazon confirmed a capex outlook for 2026 of about $220 billion. Investors worry that the company is investing too aggressively in data centres, chips and infrastructure, and that the payback on these investments is not yet obvious.
Apple showed confident business growth: revenue and profit increased substantially, with records set for June-quarter revenue and EPS. Company revenue was $109 billion, up 16% year-on-year. Net profit reached $30 billion, a 27% increase. Diluted earnings per share (EPS) rose by 29%, to $2.02. One of the most positive readings was gross margin, which increased to 50% from 46% a year earlier. Apple continues to develop the AI functionality of its ecosystem, including updating Siri and integrating intelligent capabilities into its devices and software. The success of this strategy will matter greatly for the company’s future growth. After the results, however, the shares fell by 5%, probably because of profit-taking and ahead of the US election results.
Equities: A Weak Reaction to the Market Leaders’ Quarterly Results
07
Alphabet Quarterly Free Cash Flow (USD billions)
Revenue at the largest US companies continues to grow, but investors are wary of the pace of investment in AI infrastructure. In particular, Alphabet’s free cash flow turned negative for the first time in the company’s history, which led to a 14% one-day correction in the shares.
S&P 500 Sector Returns in October 2026
This is not the first time this year that the market has seen a rapid change of leaders and a rotation of capital. In October the leaders were defensive sectors, while technology companies and the communication-services sector lagged the market.
Source: Bloomberg, Astero Falcon analytics.
Equities: A Deep Correction in Technology Stocks 08 The performance of the US equity market was uneven through October. The traditional market leaders (the technology and communication-services sectors) closed the month in a deep drawdown, while the best results came from defensive sectors (healthcare, utilities, consumer durables).
From the price peak on 6 October, the Nasdaq-100 declined by more than 10% and closed the month at a low that coincided with the 200-day moving average. The median stock in the S&P 500 has meanwhile fallen by 24% from its peak, and is therefore already in a steep correction.
Since 1940, in the period from November of a midterm-election year to June of the following year the S&P has delivered exclusively positive results. In 21 out of 21 cases the index closed the period higher, with an average result of +17%, and the worst reading was recorded in 2002–2003 at +3.5%.
According to Morgan Stanley, hedge funds were aggressively cutting positions at the end of October, reducing net exposure by 8%. This is the sharpest reduction in exposure in 10 years, even sharper than at the start of the Covid pandemic. In the past, whenever this reading fell below 6% (in 2016, twice in 2018, and in 2020, 2021 and 2025), the S&P 500 reached its low within one to two weeks and was higher one, three and six months later. After large positions have been liquidated, the market is left without the selling volume that could push prices still lower. Those same funds are then forced to re-enter, and their new buying has produced a strong rebound.
We consider that the US midterm elections on 3 November will be the catalyst for the next strong trend, and we are watching the direction in which the indices exit the current consolidation. Given the severe oversold condition, the high level of short positions, positive seasonal patterns and the important technical support levels to which Nasdaq has corrected, a rebound from current levels looks the more likely scenario.
Nasdaq-100 Index and 200-Day Moving Average
In October the Nasdaq-100 declined by 7%, and it is already 11% below its price peak. The long-term bull trend remains intact, and in the past investors have repeatedly bought dips in the index to its 200-day moving average. Source: Bloomberg, Astero Falcon analytics.
Direct Investments: Investment Volumes Are Declining Private equity funds still have dry powder, but the pace of deployment is slowing. According to KPMG’s October report, 14,650 private equity transactions were announced worldwide from January to September, for a total of $1.5 trillion. Trailing-twelvemonth deal volume fell from $2.4 trillion in the second quarter to $2.2 trillion in the third quarter. Sector composition matters: $479 billion has gone into technology, media and telecommunications since the start of the year, and $243 billion into energy and natural resources (investment in the latter supported by strong demand for energy resources).
Because the KPMG sample includes not only buyouts but any other announced transactions, these figures reflect overall market activity rather than the actual volume of cash invested by funds. The recovery in fundraising is reaching a shrinking number of funds.
Source: Bloomberg, Astero Falcon analytics.
09
The volume of US venture funding fell sharply, while the estimated number of deals remained close to a record. According to the October PitchBook–NVCA report, investment in the third quarter was $98 billion — about 40% less than in the second quarter. Around 5,012 deals were completed, the second-highest quarterly reading on record. Investment in venture-growth companies fell from $84 billion to $29 billion. The share of AI-related deals in total value also declined, from 84% to 65%. The decline in dollar volume therefore speaks more to a change in the scale and structure of financing than to a disappearance of deals themselves. A smaller overall market does not mean that the cost of entry for investors has become lower.
The funding cycle in Europe is developing differently from that in the United States. According to KPMG’s October Venture Pulse report, investment in Europe in the third quarter was $28 billion, more than the $26 billion in the second quarter; the reading has risen for eight consecutive quarters and has reached a 16-quarter high. This contrasts with the global decline in investment volumes. Growth in Europe was selective, however: five of the six funding rounds of at least $1 billion were in artificial intelligence, while investment in the United Kingdom fell to $7 billion.
Direct Investments: Investment Volumes Are Declining US Venture Capital Deal Value and Count by Quarter
Venture-capital deal volume is contracting for a second consecutive quarter, returning to the levels observed before 2026.
Source: Bloomberg, Astero Falcon analytics.
10
October: A Correction Ahead of the US Elections Fixed Income
11
October 2026
2026
Swiss Bond Index (SBI) AAA-BBB
0,76%
-0,12%
Bloomberg Barclays Euro Aggregate Corporate TR
0,76%
-0,27%
Bloomberg Barclays Pan-European High Yield TR
-1,05%
-0,23%
Bloomberg Barclays US Corporate High Yield TR
0,30%
0,99%
Bloomberg Barclays Sterling Corporate TR
0,61%
0,20%
Bloomberg Barclays China Aggregate TR
-0,21%
0,25%
Bloomberg Barclays Asia USD High Yield TR
-0,95%
2,87%
Bloomberg Barclays Global High Yield TR
-1,05%
-0,23%
JPM EMBI Global Total Return Index
1,44%
0,18%
Bloomberg Barclays Global-Aggregate TR
-0,21%
0,25%
October 2026
2026
Nasdaq-100 Index
-6,63%
13,19%
S&P 500 Index
-0,87%
13,35%
Dow Jones Industrial Average
1,76%
12,42%
MSCI World Index
-0,75%
12,64%
MSCI Europe Index
2,17%
14,52%
MSCI Emerging Markets Index
-8,04%
13,03%
SPI
6,30%
16,24%
SMIM
4,16%
12,80%
DAX
2,46%
8,60%
FTSE 100 Index
1,29%
12,74%
Hang Seng Index
-5,22%
-0,47%
Shanghai Shenzhen CSI 300 Index
-8,35%
-9,25%
Nikkei 225
-5,19%
23,21%
Equities
Commodities
October 2026
2026
Gold
-6,80%
-10,30%
Silver
-18,74%
-31,49%
Copper
-2,11%
14,08%
WTI
15,15%
81,33%
BRENT
13,63%
93,33%
Bloomberg Commodity Index
-0,08%
32,75%
Currencies
October 2026
2026
EURCHF
-2,80%
-1,11%
CHFUSD
1,30%
-3,92%
CHFGBP
0,37%
-3,31%
EURUSD
-1,50%
-4,99%
EURGBP
-2,44%
-4,41%
GBPUSD
0,95%
-0,62%
Source: Bloomberg, Astero Falcon analytics.
Disclaimer
12
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