From the studio

Podcast:CIO's Giovanni Staunovo on Russia sanctions, gold outlook (8 min)
Podcast: Why we upgraded Chinese equities to Attractive (12 min)
Video: CIO's Delwin Limas on circular AI deals & bubble concerns (5 min)

Thought of the day

The end of a choppy trading week will bring the release of delayed US inflation data that could set the tone for the week ahead, which is packed with market-moving events.

Economists expect the September consumer price index (CPI) will show month-over-month increases of 0.4% overall and 0.3% excluding food and energy. The estimated year-over-year rates are 3.1% for both gauges.

But while inflation has trended upward in recent months, markets continue to expect the Federal Reserve to cut interest rates by 25 basis points at the upcoming policy meeting next Wednesday. Along with third-quarter results from big tech companies and a face-to-face meeting between the US and Chinese presidents, investors will brace for a week filled with the potential for headlines to contribute to volatility.

The Fed is on track to continue its rate-cutting cycle. Today’s CPI will be the last significant economic reading before Fed officials meet. In our view, Fed Chair Jerome Powell’s remarks earlier this month likely sealed the deal for a rate cut next week. Not only did he highlight the risks of a softening labor market, but he also suggested that the central bank is nearing a point where it will stop reducing the size of its bond holdings. We believe the case for quality fixed income as a source of income and portfolio resilience remains strong, and see further US dollar weakness, especially as the European Central Bank is expected to hold policy rates steady next week.

Tech earnings will offer insights into AI capex and monetization. Microsoft, Alphabet, Meta, Apple, and Amazon will all report their third-quarter earnings next week, with investors looking for evidence that would ease their concerns over the sustainability of the AI rally. Results from early reporters like TSMC and ASML have shown strong AI demand, and we believe AI capex trends should continue to exceed expectations and remain robust. Meanwhile, monetization should pick up further. We maintain the view that AI-linked stocks will remain a key driver of global equity performance and that investors should position to profit from the expected further rally.

Trump-Xi talks suggest easing tensions. While we do not expect any substantial US-China trade deal to be reached when Trump and Xi meet in South Korea next week, an extension of the trade truce and signals of easing tensions between the world’s two largest economies would be welcomed by the markets. This, coupled with further details on Beijing’s next five-year plan, which is set to have a strategic focus on innovation, should support China's tech sector and broader equity market.

So, while volatility could rise in the coming week, these events also have the potential to serve as positive catalysts for markets.