Diversification Re-engineered

Multi Asset Tactical View: October 2026

Higher inflation, yields, and growth

September: Yields in focus

September was a difficult month for global equities as the widening Iran conflict intensified concerns about energy supplies, inflation and monetary tightening. AI-related volatility persisted, although technology stocks recovered from an earlier sell-off. Global bonds declined as surging oil prices and fiscal concerns pushed yields higher. The Fed, ECB and BoJ raised interest rates, while corporate credit also weakened. The US dollar strengthened on expectations of further Fed tightening, while the euro declined amid political and fiscal uncertainty. Brent crude briefly exceeded USD 100 per barrel before closing the month near USD 98. Gold fell as higher yields and dollar strength outweighed safe-haven demand.

Our take: Strong fundamentals

We remain constructive on global equities, as strong earnings continue to offset tighter monetary policy and energy-related risks. Emerging markets are our preferred equity region, supported by the AI cycle in South Korea and Taiwan, although subdued fundamentals in China remain a constraint. US equities are also sustained by robust AI-led earnings, but elevated valuations and rising yields require selectivity. Japanese equities benefit from improving revisions and policy support, while euro zone equities are supported by improving growth despite continued energy and stagflation risks.

We remain cautious on global sovereign bonds. US Treasuries face pressure from hawkish policy expectations, geopolitical uncertainty and competing issuance. Euro zone sovereigns are constrained by energyrelated inflation and fiscal strains. In credit, we are cautious on US high yield and EM fixed income, that despite resilient growth and relative stable spreads, can be challenged by higher yields and the recent dollar appreciation.

We still broadly favour commodities as an asset class. Oil benefits from a tighter supply backdrop. Copper is supported by grid investment and persistent supply constraints. We remain mildly constructive on gold, as fiscal deficits provide medium-term support. In currencies, we remain moderately positive on the US dollar against the euro, supported by higher US yields and resilient growth.

Tactical asset allocation views summary

These views reflect a short-term time horizon showing the direction and conviction of the team’s analysis based on both fundamental and systematic indicators. These views are independent of individual portfolio construction considerations.

Source: Bloomberg Finance L.P.; data as of 30 September 2026. Past performance does not predict future returns. Global equities are represented by MSCI AC World Daily TR, Global sovereign by FTSE World Government Bond Index – Developed Markets in USD, Commodities by Bloomberg Commodity Index, Currencies (USD) by Bloomberg Dollar Spot, US equities by S&P 500 Index, Euro-zone equities by MSCI EMU Index (EUR), Japanese equities by TOPIX Index (JPY), Emerging markets by MSCI EM NR, US treasuries by J.P. Morgan US Government Bond Index, UK gilts by J.P. Morgan UK Government Bond Index, Euro-zone sovereign by J.P. Morgan EMU Investment Grade Index, US high yield by Bloomberg U.S. Corporate High Yield, EM fixed income by J.P. Morgan EMBI Plus Index, Oil by S&P GSCI Crude Oil, Copper by BBG Copper TR, Gold by GOLD SPOT $/OZ. For currencies, the US dollar (USD) and the British pound (GBP) are represented by each respective currency vs. the euro (EUR) as well as the USD vs. the Japanese yen (JPY).

Trade idea of the month: Robotics and automation equities

Ageing populations, labour shortages and efforts to strengthen supply chains are driving demand for automation. Meanwhile, advances in AI, lower compute costs and better machine vision are allowing robots to handle more complex tasks. These structural trends could sustain earnings growth across the wider robotics and automation ecosystem, well beyond humanoid robots.

Expected changes in working-age populations (aged 15–64) until 2100

Source: United Nations, World Population Prospects 2024. The analysis uses the Medium fertility variant. Data are annual projections for 2025–2100 from the 2024 edition, covering the population aged 15–64. Indexed values show the percentage change in each geography’s population aged 15– 64 relative to 2025 (2025 = 0%) as a proxy for the change in working population.

Chart of the month: Global government bond yields

Repricing of future growth, and debt sustainability
10 year government bond yields

Source: Bloomberg, Allianz Global Investors, data from 1 Jan 2026 to 2 Oct 2026 as at 2 Oct 2026. The information above is provided for illustrative purposes only, it should not be considered a recommendation to purchase or sell any particular security or strategy or as investment advice. Past performance, or any prediction, projection or forecast, is not indicative of future performance.

The rise in global government bond yields has been one of this year’s defining market moves, with the chart illustrating both its speed and broad reach. Surging oil prices created the risk of an inflationary shock, but central bank tightening has helped hold long-run expectations in check. Against this backdrop, inflation has contributed to higher yields, but structural forces have played a more important role, notably expanding government borrowing, additional financing needs associated with the AI investment build-out and optimism towards longer-term productivity. France is particularly exposed, as its heavy debt burden makes it more sensitive to shifts in funding conditions and fiscal confidence. The surge in global bond yields is not purely negative, however. Markets have repriced decisively, and the resulting carry now offers investors an attractive cushion against further volatility.

The MSCI World Net Total Return Local Index is a free-float weighted equity index, and includes developed world markets. The FTSE World Government Bond Index- Developed Markets measures the performance of fixed-rate, local currency, investment-grade sovereign bonds issued in developed markets. The Bloomberg ex-Agriculture & Livestock Capped 6 Month Forward Index is a composite index that tracks the performance of commodities, excluding agriculture and livestock, with a capped allocation to ensure diversification. The Bloomberg Dollar Spot Index tracks the performance of a basket of ten leading global currencies versus the U.S. Dollar. The S&P 500® index includes 500 leading US-listed companies and captures approximately 80% coverage of available market capitalization. The TOPIX, also known as the Tokyo Stock Price Index, is a capitalizationweighted index of all companies listed on the First Section of the Tokyo Stock Exchange. The Bloomberg US Government Bond Index is comprised of the US Treasury and US Agency Indices. The J.P. Morgan EMU Government Bond Investment Grade (IG) Index aims to track the performance of eligible fixed-rate, euro-denominated domestic government debt issued by Eurozone countries with minimum €80 billion debt outstanding. Securities or issuers must be rated investment grade to be eligible. The J.P. Morgan EMBI Global Diversified Index tracks liquid, US Dollar emerging market fixed and floating-rate debt instruments issued by sovereign and quasi-sovereign entities. The Bloomberg Copper Subindex Total Return Index tracks the performance of copper futures. The USD-EUR Carry Return reflects the return from borrowing the short currency (EUR) to fund the purchase of the long currency (USD), while earning interest. The JPY-USD Carry Return reflects the return from borrowing the short currency (JPY) to fund the purchase of the long currency (USD), while earning interest. Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. It is not possible to invest directly in an index.

Diversification does not guarantee a profit or protect against losses.

Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors might not get back the full amount invested. Past performance does not predict future returns. If the currency in which the past performance is displayed differs from the currency of the country in which the investor resides, then the investor should be aware that due to the exchange rate fluctuations the performance shown may be higher or lower if converted into the investor’s local currency. This is for information only and not to be construed as a solicitation or an invitation to make an offer to buy or sell any securities. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. The data used is derived from various sources and assumed to be accurate and reliable at the time of publication. but it has not been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or willful misconduct. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted, except for the case of explicit permission by Allianz Global Investors. This material has not been reviewed by any regulatory authorities.


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