Equity
Global Equity Compass: Oct 2026
Renewed momentum, broader opportunities
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While investors navigate elevated interest rates, energy prices, and geopolitical uncertainty, confidence in the global outlook improved during September. Economic activity remained more robust than anticipated, earnings expectations continue to hold up and business sentiment shows signs of strengthening. Importantly, the market narrative continues to broaden; while investors are focusing on the next phase of AI adoption, improving economic momentum and constructive earnings are creating opportunities elsewhere.
The result is an environment that appears healthier than earlier in the year. Participation has broadened, earnings remain supportive, and areas of the market that lagged are now contributing more meaningfully to returns. While risks remain, the backdrop entering the final quarter of 2026 remains constructive. For investors, the challenge may be less about identifying whether opportunities exist and more about where the next sources of growth and earnings momentum are emerging. |
Global Equity Compass | What to watch
1 Building the AI ecosystem
The next phase of AI is becoming increasingly physical. New data centres require power, connectivity, cooling and specialised materials, creating investment opportunities well beyond software and semiconductors. As the focus shifts from developing AI capabilities to deploying them at scale, investors may find opportunities among the companies helping build the infrastructure behind the technology
2 Asia’s growth stories
Asia remains central to the world’s most important long-term trends. China’s industrial ecosystem continues to support technological adoption, India’s growing middle class is driving consumption, and Japan’s reforms are improving corporate dynamism. While the drivers differ across markets, they share a common characteristic: helping strengthen the region’s position in the global economy.
3 The case for balance
AI remains the defining investment theme of our time, but successful portfolios rarely depend on single sources of return. Attractive valuations and resilient earnings are supporting a broader opportunity set across equity markets. In an environment of evolving market favourites and elevated rates, maintaining exposure to a wider range of businesses may help investors capture opportunities wherever they emerge.
Equity market data
Source: Allianz Global Investors E&S team, 30 September 2026.1
Market review – style lens
- Stocks benefiting from strong market trends (“Momentum”) rebounded strongly in September, reversing some of the weakness seen over the summer. Investors returned to companies with strong earnings and growth profiles, helping Momentum become the best-performing style factor during the month. The move suggests confidence in long-term growth themes remains intact despite periodic rotations elsewhere.
- Higher-quality companies (“Quality”) also delivered positive performance in September. After lagging in August, investors renewed their focus on businesses with resilient earnings, strong balance sheets and dependable cash flows. In a market still navigating geopolitical uncertainties and valuation concerns, quality characteristics are once again proving attractive.
- Attractively valued stocks (“Value”) struggled during September and were among the weakest-performing style factors. Following several months of improved performance, investor attention shifted back towards companies offering stronger earnings growth and positive revisions. While valuation discipline remains important over the longer term, the market’s preference was clearly for businesses demonstrating superior growth and earnings prospects.
Chart of the month: Comsumption pools are shifting to Emerging Asia & India
Source: LSEG/Allianz Global Investors, October 2026
The chart shows average S&P 500 returns before and after midterm elections.2 In the 12 months before midterms, returns have historically been subdued, averaging 2.9%. By contrast, the 12 months following have produced returns of 12.4%, well above the longterm annual average of 8.9%.
No two elections cycle are identical. However, one theme is that markets prefer clarity to uncertainty. In the run-up to elections, investors contend with unknowns around the broad direction of policy. Once the result is known, even if the outcome was unexpected, uncertainties diminish, and markets can refocus on fundamentals. The lesson here may be simple: politics can be noisy, but uncertainty is often the bigger market driver.
1 The referenced indices/benchmarks are shown for general market comparisons and are not meant to represent any particular fund. An investor cannot directly invest in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented.
2 Data from 1929-2024. The hypothetical performance shown is for illustrative purposes only and do not represent actual performance; they do not predict future returns.
