Monthly Market Monitor October 2026
In a Nutshell
Chart of the Month
The prospects of a victory by the Democrats in the upcoming US midterm elections in November seem more and more promising to the markets. At the end of September, the prediction platform Kalshi was pricing in a more than 90 % probability of the Democrats winning the House of Representatives. A look at the history books shows that in the last 23 midterm elections, the party of the sitting president lost 27 seats on average in the House. The Democrats are also well out in front in the Senate, according to prediction platforms, though the Republicans were con-
sidered the clear favorites back in spring. The reasons for the current public discontent in the USA are patently obvious: gasoline prices are 52 % above the pre-war level and the inflation rate stands at 3.4 %. In the meantime, Donald Trump’s public approval ratings have dropped to below 40 %, and the war with Iran is costing him support even among his own ranks. The election campaign accordingly seems flustered and jittery: the president has promised every adult US citizen a USD 5,000 dividend if his party retains majority control over both chambers of Congress. The cost of
up to USD 1.2 trillion to keep that promise would even exceed the US government’s annual defense budget. However, the federal budget deficit looks set to remain large with or without the Trump dividend. If the Democrats take Congress, that is bound to slow down Trump’s legislative agenda and hamper his staffing decisions. But with tariffs, regulations, and foreign policy, there are still enough instruments in place to keep geopolitics and financial markets busy.
Blue wave | US midterm elections tilting in favor of Democrats Odds of a Democratic majority in the US Congress
100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30%
01/2026 01/2026
02/2026 02/2026
03/2026 03/2026
04/2026 04/2026
05/2026 05/2026
Senat Senat
06/2026 06/2026
House House
07/2026 07/2026
08/2026 08/2026
09/2026 09/2026
Source: Kalshi
At the end of September, the prediction platform Kalshi was pricing in a more than 90 % probability of the Democrats winning the House of Representatives.
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Kaiser Partner Financial Advisors | Monthly Market Monitor – October 2026
Macro Radar
Taking the pulse of economic activity Interest rates on the rise
Despite opposition from the White House, the US Federal Reserve raised its policy rate target range at its last FOMC meeting by 25 basis points to 3.75 % – 4.00 %, marking its first federal funds rate hike in over three years. The move was prompted by robust economic activity in the USA, but especially by inflation, which is being driven by rising energy prices. The markets are pricing in at least one more quarter-point interest-rate hike by the end of this year. The Fed finds itself in good company with its policy rate hike. The European Central Bank, too, raised its benchmark deposit rate in September, to 2.5 %, while the Bank of Japan lifted its policy rate to 1.25 %, the highest interest-rate level in the Far East in over 30 years. This means that three of the world’s most important central banks have now tightened their respective interest-rate policies in the span of eight days. The Swiss National Bank did not join in: at its September monetary policy assessment meeting, it kept its benchmark lending rate at 0 %. The SNB can afford to do that because the inflation rate in Switzerland, at 0.8 %, is still within the tolerance range.
Persistent conflict in Iran A good seven months since the start of the war with Iran, the Strait of Hormuz remains effectively closed to shipping, the price of Brent crude oil is scraping the USD 100-perbarrel mark, and the East-West Pipeline across Saudi Arabia – one of the prime alternative routes – remains only partially operational. The pressure on energy markets has increased compared to the crisis this past spring. At that time, the release of government petroleum reserves and a reduction in Chinese fuel imports cushioned the shock. Today, the USA plans to increase its reserves and China is stepping up
its fuel purchases ahead of winter. The crisis is reflected not just in the price of crude oil, but also in that of petroleum derivatives like diesel fuel, the price of which has risen even more sharply and ultimately affects consumers. Meanwhile, Europe’s Achilles’ heel is natural gas, whose price increase in Europe has far outpaced that of oil since the outbreak of the war. The fact that gas storage reservoirs on the old continent are at below-average fill levels ahead of the coming winter – especially in Germany – doesn’t make the situation any easier. Meanwhile, an easing of the tension is not in sight, at least not in the near term: Teheran has an incentive to escalate the conflict until the US midterm elections to hurt President Trump at the ballot box. Ending the blockade would likely be in Teheran’s interest in the medium term because it is harming not just the world economy, but also Iran’s own economy.
An upturn with a caveat It’s astounding how little energy prices have slowed economic growth in recent months.
Purchasing managers’ surveys surprised in September with a sharp jump upward: companies in the USA reported the strongest expansion of their business activity in more than five years, and the Eurozone purchasing managers’ index climbed to its highest level in three-and-a-half years. At least part of the growth in Europe is attributable to inventory stockpiling to preempt supply shortages. The rest stems in particular from the manufacturing sector, which is benefiting from partially government-financed spending on artificial intelligence and defense. In the USA as well, investment in AI and an expansive fiscal policy are driving economic activity, with robust impetus also coming from the services sector. However, consumers do not seem particularly impressed by this: spending sentiment remains in the doldrums. High energy prices are being compounded by a rise in market interest rates that is making mortgages in the USA more expensive. Consumer spending sensitive to changes in interest rates therefore looks set to recede further.
Interest-rate tightening in lockstep | The SNB is not following suit Policy interest rates in percent 6% 5% 4% 3% 2% 1% 0 -1% 2020
2021
2022
Fed
EZB
2023
BoJ
SNB
2024
2025
2026
Source: Bloomberg
It’s astounding how little energy prices have slowed economic growth in recent months. Purchasing managers’ surveys surprised in September with a sharp jump upward.
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Kaiser Partner Financial Advisors | Monthly Market Monitor – October 2026
Asset Allocation
Notes from the Investment Committee Typical September volatility was absent this year, at least on the surface. The S&P 500 traded close to its all-time high, bucking rising bond yields, an increase in energy prices, and a number of central-bank policy rate hikes. The index’s resilience was sustained essen-
tially by the strong performance by technology companies while other segments of the market did significantly less well. Meanwhile, on fixed-income markets, government bonds turned heads. Their yields have climbed to multiyear highs in recent weeks in the USA,
Germany, and Japan – sovereign debt securities accordingly have resumed yielding returns worth mentioning.
Asset Allocation Monitor –
+
Cash
Equities
Fixed Income
Global
Sovereign bonds
Switzerland
Corporate bonds
Europe
Microfinance
UK
Inflation-linked bonds
USA
High-yield bonds
Japan
Emerging-market bonds
Emerging markets
Insurance-linked bonds
Alternative Assets
Convertible bonds
Gold
Duration
Hedge funds
Currencies
Structured products
US dollar
Private equity
Swiss franc
Private credit
Euro
Infrastructure
British pound
Real estate
–
+
–
+
Scorecard Macro Monetary / fiscal policy Corporate earnings Valuation Trend Investor sentiment
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Kaiser Partner Financial Advisors | Monthly Market Monitor – October 2026
Equities: Robust earnings constrain headwinds Equity markets have been posting remarkable numbers since the start of this year: the S&P 500 has gained around 12 % since the start of January even though its price-to-expected-earnings ratio has fallen by approximately 17 % over the same period. The S&P 500’s advance therefore is not based on valuation expansion, but rather particularly on a rise in earnings expectations. The big technology stocks have contributed disproportionately to the index’s performance, which means that market breadth remains very concentrated. Corporate earnings, though, are projecting a wider picture: profit expectations have improved even apart from the hyperscalers. The robust earnings growth is thus buttressing the broad market and cushioning part of the headwinds being whipped up by the increase in interest rates. Nevertheless, there are reasons to exercise caution this autumn. Rising energy prices may raise inflation expectations and might make further rate hiking by central banks necessary. If that causes bond yields to rise, stock valuations may come under downward pressure as future earnings get discounted at a higher rate and safe bonds become more attractive relative to equities. Despite these risks, share-price volatility has stayed remarkably low thus far. The VIX volatility index also has been hovering at a strikingly low level. A market setback in autumn wouldn’t be surprising given the current interest-rate and inflation climate. The main question remains whether earnings growth can continue to outrival rising fixed-income yields.
Fixed income: Bonds are becoming (even) more attractive Government bonds have garnered a lot of attention in the media and on financial markets in recent weeks. The yield on 10-year US Treasury notes crossed over the 5 % mark, and German and Japanese government bonds are now also yielding more than they have in years. However, the rise in yields is not automatically interpretable as a sign of a debt
crisis. It thus far mainly reflects an increase in real yields and a change in expectations regarding monetary policy. Uncertainty about the future inflation trend and governments’ large borrowing needs also play a role. The rise in yields, though, also means something positive for investors: after years of very low yields, government bonds have at long last resumed yielding returns worth mentioning. Higher entry-point yields improve long-term return potential and create a bigger buffer against price drawdowns, though they do not eliminate the near-term price risk. In the meantime, the market for corporate bonds remains relatively quiet. Risk premiums are tight, which indicates that investors are still not demanding substantially higher spreads for credit risk. However, investors are differentiating more sharply within the corporate bond market. Issuance volume has soared since 2024 particularly among the big technology companies because their huge investments in AI infrastructure are increasingly being financed via the capital market. The additional supply has raised risk premiums for some individual issuers and tenors and creates more interesting valuations here and there.
Alternative assets: “Concrete gold” remains in demand In recent years, falling interest rates were a vital tailwind for Swiss real estate assets. Lately, however, publicly traded real estate companies and investment funds have come back under pressure. A key reason why lies at the long end of the yield curve. Rising market interest rates raise the discount rate applied to future rent income and make real estate appear less attractive relative to bonds. The fundament, though, remains intact. Low financing costs and housing scarcity in urban economic centers continue to buttress rent revenue. Moreover, the income aspect remains the real clincher for investors: at a policy interest rate of 0 %, dividend yields remain in demand, and “concrete gold” is generally considered a safe asset in any case during uncertain times. The drawback is valuations
because premiums to intrinsic value are still above their long-term average despite the summer correction. For some time now, another question has been turning into a central issue for the longer term. That question is: How is artificial intelligence impacting demand for office space? Around two-thirds of all office employees in Switzerland work in professions considered greatly affected by AI. Estimates project a contraction in demand for office space in the single-digit percent range within the next five years. The determining factor, though, is whether AI will replace or supplement human labor. There are currently no signs of widespread job cuts due to AI. Nevertheless, anyone who invests in office real estate directly or via mutual funds should keep on eye on this development.
Currencies: Expectations moving exchange rates Three of the world’s major central banks raised their benchmark interest rates in September, but the driving force moving exchange rates was less the monetary policy decisions themselves and more what the markets had already priced in. The euro actually even depreciated further against the US dollar after the European Central Bank’s rate hike because that action had largely been anticipated. The US Federal Reserve raised its policy interest rate shortly afterwards. The Fed’s comparatively hawkish outlook and the prospect of a persistently elevated US interest-rate level bolstered the greenback. The economic consequences of high energy prices, which impact Europe more than the USA as a net importer of energy, additionally bolstered the US dollar. The yen, meanwhile, recovered over the summer with the aid of a coordinated intervention by Japan and the USA. However, other factors are likely to be crucial for a sustained appreciation of the Japanese currency. Those factors include, for instance, a more restrictive Bank of Japan or a reversal of capital flows back into the land of the ris-
The rise in yields, though, also means something positive for investors: after years of very low yields, government bonds have at long last resumed yielding returns worth mentioning. Higher entry-point yields improve long-term return potential and create a bigger buffer against price drawdowns, though they do not eliminate the near-term price risk. 5
Kaiser Partner Financial Advisors | Monthly Market Monitor – October 2026
ing sun. If the Bank of Japan fails to meet the monetary policy expectations that are already priced in, the yen risks coming under renewed pressure. The Swiss franc’s interest-rate differential versus higher-yielding currencies widened because the Swiss National Bank left its policy rate at 0 %. This enhances the franc’s attractiveness as a funding currency for carry trades and may continue to weigh on Switzerland’s currency in the near term.
The yield on 10-year US Treasury notes and US Treasury bond prices long moved inversely to each other: when yields rose, bond prices fell and the total return suffered. The year 2022 showed just how painful that could be: that year, yields rose by a good two percentage points while a portfolio of US Treasury bonds lost around 12 % in value. Over the last twelve months, yields have risen again by more than one percentage point, but on the bottom line this time, the performance of the portfolio of US Treasury bonds is down by only 1.4 %. The reason why often goes overlooked: there now is a higher ongoing interest income stream again. During the era of zero interest rates, this cushion was much thinner, which is why rises in yields had a much stronger impact on the value of the portfolio. Today the ongoing interest income stream contributes to offsetting potential price declines caused by rising yields. But that is not protection against losses: if bond prices fall sharply enough, the losses exceed the interest income. So, for long-term investment success, what’s crucial is not just the price movement of a single month, but also the entry-point yield and the length of the holding period.
Chart in the Spotlight Interest-free risk was yesterday | Rising yields hurt less today than before US Treasury Bond Total Return Index in USD and yield on 10-year US Treasury notes 2,650 2,650 2,600 2,600 2,550 2,550 2,500 2,500 2,450 2,450 2,400 2,400 2,350 2,350 2,300 2,300 2,250 2,250 2,200 2,200 2,150 2,150 2,100 2,1002021
2021
2022
2023
2022Total Return Index 2023 US Treasury (le� scale) US Treasury Total Return Index (le� scale)
2024
2025
2026
0 0 0.5% 0.5% 1.0% 1.0% 1.5% 1.5% 2.0% 2.0% 2.5% 2.5% 3.0% 3.0% 3.5% 3.5% 4.0% 4.0% 4.5% 4.5% 5.0% 5.0% 5.5% 5.5%
2024 US 10-Year Treasury2025 Yield, inverted (right2026 scale) US 10-Year Treasury Yield, inverted (right scale)
Source: Bloomberg
So, for long-term investment success, what’s crucial is not just the price movement of a single month, but also the entry-point yield and the length of the holding period.
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Kaiser Partner Financial Advisors | Monthly Market Monitor – October 2026
The Back Page
Asset Classes Performance as of 30 September 2026 Asset class
YTD 1 Month
1 year
3 years*
Index
Cash US-Dollar
2.97%
0.35%
4.02%
4.74%
USD Interest Rate Return
Euro
1.77%
0.23%
2.31%
2.92%
EUR Interest Rate Return
Swiss Franc
-0.02%
0.00%
-0.03%
0.56%
CHF Interest Rate Return
USA
-4.69%
-3.34%
-3.62%
3.04%
Bloomberg US Govt 7-10 Yr Bond Index (USD)
USA inflation-protected
-2.12%
-2.61%
-1.99%
3.75%
Bloomberg US Treasury Inflation-Linked Bond Index (USD)
Germany
-3.06%
-1.77%
-3.49%
1.05%
Bloomberg Germany Govt 7-10 Yr Bond Index (EUR)
United Kingdom
-2.30%
-1.61%
0.42%
2.70%
Bloomberg UK Govt 7-10 Yr Bond Index (GBP)
Switzerland
-2.45%
-0.71%
-1.20%
2.74%
Bloomberg Switzerland Govt 7-10 Yr Bond Index (CHF)
Fixed Income Government Bonds
Corporate Bonds US Investment Grade
-1.26%
-1.76%
0.02%
5.47%
Bloomberg US Corporate 3-5 Yr Index (USD)
EU Investment Grade
-0.98%
-1.19%
-0.45%
4.18%
Bloomberg European Corporate 3-5 Yr Index (EUR)
US High Yield
0.10%
-2.52%
1.41%
8.03%
Bloomberg US Corporate High Yield Index (USD)
EU High Yield
0.31%
-1.80%
0.98%
6.64%
Bloomberg Pan-European High Yield Index (EUR)
Emerging-market bonds
-1.88%
-3.55%
1.16%
9.20%
JPMorgan EMBI Global Core Index (USD)
Insurance-linked bonds
9.53%
1.83%
12.10%
14.07%
Swiss Re Global Cat Bond Total Return Index (USD)
Convertible bonds
12.92%
-1.40%
14.17%
17.25%
Bloomberg Global Convertibles Index (USD)
Others
Equities Global
12.09%
-1.15%
15.68%
21.91%
MSCI World Gross Total Return Index (USD)
USA
12.75%
-0.35%
15.74%
22.89%
S&P 500 Total Return Index (USD)
Europe
10.12%
-2.40%
17.28%
15.78%
STOXX Europe 600 (Gross Return) (EUR)
United Kingdom
9.55%
-1.96%
17.07%
15.64%
FTSE 100 Total Return Index (GBP)
Switzerland
7.64%
-2.48%
17.10%
10.93%
Swiss Performance Index (CHF)
Japan
23.06%
-0.27%
33.91%
23.80%
Topix Total Return Index (JPY)
China
-11.75%
-4.55%
-18.23%
9.96%
MSCI China Gross Total Return Index (USD)
Emerging-markets ex. China
37.39%
0.55%
51.52%
29.99%
MSCI Emerging Markets ex China Gross Return Index (USD)
Alternatives Commodities
29.26%
0.30%
35.51%
10.59%
Bloomberg Commodity Index (USD)
Gold
-3.75%
-6.31%
7.73%
31.02%
Gold Spot (US Dollar / Ounce)
Bitcoin
-4.59%
6.05%
-27.06%
45.63%
XBTUSD Spot Exchange Rate
Real estate USA
4.90%
-6.37%
1.68%
6.66%
S&P US All Equity REIT Index (USD)
Real estate Switzerland
-2.97%
-1.92%
1.97%
9.84%
SXI Real Estate Funds Total Return Index (CHF)
Hedge Funds
6.62%
2.28%
8.92%
11.56%
Bloomberg All Hedge Fund Index (USD)
Private Equity
-15.55%
-11.02%
-16.53%
6.70%
Global Listed Private Equity Index (USD)
EUR/USD
-3.54%
-2.48%
-3.44%
2.33%
EURUSD Spot Exchange Rate
EUR/CHF
1.74%
0.83%
1.32%
-0.72%
EURCHF Spot Exchange Rate
GBP/USD
-1.56%
-2.10%
-1.35%
2.83%
GBPUSD Spot Exchange Rate
Currencies
*annualised
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Kaiser Partner Financial Advisors | Monthly Market Monitor – October 2026
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