Equity
Global Equity Compass: Sep 2026
From concentration to opportunity
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August highlighted an important shift in global equity markets. Confidence in the long-term potential of artificial intelligence (AI) remains intact, but investors are becoming increasingly selective about where they expect future returns to come from. Rather than concentrating exclusively on a handful of established AI beneficiaries, markets are rewarding a wider range of companies with improving earnings prospects and compelling valuations.
As a result, the market has further broadened. Smaller companies and previously overlooked areas of the market are attracting fresh interest, while some of the biggest winners of the AI-driven rally take a breather. This rotation is being accompanied by periods of volatility as investors assess the sustainability of AI-related spending, higher bond yields, and ongoing geopolitical risks. Beneath steady headline index performance, a significant reassessment may be underway. Increasingly, investors appear focused not on yesterday’s winners, but on identifying the businesses most likely to deliver the next phase of earnings growth. |
Global Equity Compass | What to watch
1 AI beyond the chips
While demand for semiconductors remains strong, attention is shifting towards the ecosystem required to support AI deployment. Rising data-centre demand is creating opportunities across power systems, optical networking, advanced materials and other technologies. Meanwhile, the development of agentic AI is broadening opportunities beyond those that initially led the AI boom.
2 Asia’s innovation advantage
Asia remains a source of long-term opportunities, with tech supply chains, manufacturing expertise, and AI capabilities driving innovation and investment. China’s industrial ecosystem is supporting AI diffusion, while India benefits from strong domestic consumption, demographics, and a developing tech sector. In Japan, governance reforms and supportive policy are helping improve shareholder returns.
3 The case for Value
As the market broadens, investors may benefit from looking beyond the dominant themes of late. Value equities continue to offer diversification characteristics, supported by relatively low valuations and subdued earnings expectations. They may also benefit from an environment of higher rates, while providing exposure to sectors and factors that differ from momentumdriven investments.
Equity market data
Source: Allianz Global Investors E&S team, 31 August 2026.
Market review – style lens
- “Momentum” stocks experienced another challenging month in August, continuing to reverse the strong gains seen earlier in the year. Investors became more selective, particularly within technology and AI-related areas, while capital increasingly rotated into previously overlooked parts of the market, providing support for smaller cap stocks in particular.
- “Quality” stocks also lagged during the month. While companies with strong balance sheets, resilient earnings and robust cash flows remain attractive over the long term, improving investor confidence encouraged a greater willingness to move beyond traditional defensive characteristics. As risk appetite improved, investors showed increased interest in sectors and companies offering greater cyclical upside.
- Attractively valued stocks (“Value”) delivered modest positive returns in August, outperforming both Momentum and Quality. While gains were relatively subdued, the style continued to benefit from the broadening of market participation and a growing willingness among investors to look beyond a narrow group of market leaders. Companies with supportive valuations and resilient business fundamentals remain well placed.
Chart of the month: Consumption pools are shifting to Emerging Asia & India
Source: Deutsche Bank, August 2026.
Consumer spending is set to become increasingly concentrated in Emerging Asia and India, reflecting a significant long-term shift in the global economy. While North America and Europe accounted for more than half of global consumption in 1997, their share is projected to continue declining. By contrast, India and Emerging Asia are set to continue seeing sharp rises in their contribution to global consumption.
As millions of consumers move into higher income brackets, demand is broadening beyond necessities towards discretionary spending on financial services, healthcare, travel, technology and premium consumer goods. Companies with exposure to these growing consumer markets may be well positioned to benefit from powerful structural tailwinds as the world’s consumption landscape continues to evolve.
