Investment environment overview 10/2026

October opened with record highs but ended with the Nasdaq suffering its worst single day decline since June. Early in the month, Trump ruled out further strikes on Iran ahead of the midterms, however the calm was short lived. Attacks on shipping around the Strait of Hormuz rose to their highest level since the war began, pushing Brent to around USD 117/bbl on 23 October.

Then came the reality check for technology stocks. Late month results from the biggest tech companies reignited fears that CapEx is growing faster than the cash it generates. Central banks offered little reassurance. September U.S. CPI accelerated to 3.7% YoY, partly on a 9.1% jump in gasoline prices, and the Fed held rates in a 10–2 vote. The ECB and BoJ also held, at 2.50% and 1.25% respectively. Attention now turns to the U.S. midterms and whether the pause in strikes on Iran will survive beyond the vote.

The Nasdaq Composite fell 5.3%, its worst month since March 2025, and the Nasdaq-100 fell 6.7%, entering correction territory. The S&P 500 slipped 0.9%, while the Dow gained 1.7% and the STOXX 600 added 1.9%.

Big Tech’s CapEx bill finally comes due

Beneath the selloff, Q3 earnings season has been solid. With more than half of S&P 500 companies having reported, earnings growth stands at 30.2% YoY, the third straight quarter above 25%. Interestingly, the Mag7 are no longer leading the pack. Their 22.6% earnings growth trails the other 493 companies’ 32.6%, the first time this has happened since Q4 2022.

The market has been unforgiving. Alphabet plunged 12.6%, its worst day since its 2004 listing, as free cash flow turned negative. Amazon fell more than 7% after hours on USD 77.3b of quarterly CapEx. Even positive surprises offered little protection – Intel beat estimates but lost 29%, its worst day since 1974, after warning it would burn cash this year. Microsoft was the notable exception, gaining around 4% on strong Azure growth.

Another reality check may be approaching. On 26 October, Anthropic filed for a Nasdaq listing, disclosing a first half net loss of USD 80.7b on revenue of USD 16.3b. At this point, investors may reasonably start asking whether the AI revolution is becoming more expensive than even its most enthusiastic supporters had anticipated.

The national team comes to the rescue

China’s AI shares suffered a far sharper correction compared to the U.S. The STAR 50 has fallen 40% in under four months. Even so, it still trades at around 100x trailing earnings, versus roughly 30x for the Nasdaq 100. The damage has spread well beyond individual companies as according to Goldman Sachs, AI-related stocks now account for 42% of market cap and 57% of turnover across China’s A- and H-share markets.

The problem is not simply that valuations had become excessive; expectations had also moved considerably faster than actual business performance as Cambricon doubled quarterly revenue to CNY 3.53b, well short of the roughly CNY 6.26b expected, and its shares have halved since June.

Beijing has stepped in. Goldman estimates the state-backed “national team” bought around CNY 170b of index ETFs in October. This time the buying has focused on tech, which is central to Beijing’s self-reliance push. That reverses January, when Central Huijin reportedly sold about USD 67.5b of ETFs to cool the rally. In other words, Beijing appears to have changed its mind about which parts of the market deserve a helping hand. For investors, the question is whether state support can stabilize valuations or simply postpone another reckoning.

Lula wins, markets lose

Markets had largely positioned for a Flavio Bolsonaro victory in Brazil, so Lula’s win in the 25 October runoff came as a major surprise. On 26 October, the Ibovespa plunged 13.9%, triggering a circuit breaker, and the real lost 8.8% against the dollar, its steepest one-day drop since 1999.

Investors fear looser fiscal policy and more state intervention, with public debt already above 80% of GDP. Brazilian equities ended October down about 12% in USD terms, and Bolsonaro’s refusal to recognize the result adds further uncertainty. For investors, the Brazilian episode is a reminder that markets do not necessarily reward the outcome they have positioned for. Sometimes, the biggest risk is not what happens, but what happens instead of what everyone expected.

The dollar keeps its edge

EUR/USD has eased back into the 1.1150–1.1200 support area we highlighted last month and is now trying to stabilize. Any rebound is likely to meet resistance around 1.1300–1.1400. We remain positive on the US dollar as long as the pair stays below 1.1500. A move above that level would turn our view neutral, and a break above 1.1600 would raise the risk of a renewed dollar downtrend. If the euro instead falls through 1.1100 without first testing resistance, that would point to further euro weakness. Precious metals remained under selling pressure over the month, and prices are approaching levels that look attractive again. Gold is the exception, as it still carries the risk of a deeper correction. We expect the market to spend more time building a base before the next bull market begins.