November has barely begun, and two finalists of the 2026 Asset Allocation Awards have already published the month’s first updates. The Consensus of 1 November remains risk-on: for the first time, inflation is the main concern, and asset managers are playing it through equities and commodities. Pictet Asset Management and Candriam both expect fewer rate hikes than the market. Yet they reach different conclusions: Pictet cuts equities to neutral, while Candriam stays in equities and keeps long duration in bonds.

House View: Pictet Asset Management

Pictet Asset Management, finalist for the Sectors Award, cuts equities as an asset class from overweight to neutral: “The mix of risks favours a neutral allocation across global equities, bonds and cash.” The reason is not inflation, which Pictet expects to peak in the US early next year, but tighter liquidity and rising borrowing costs. Financials also move to neutral: after Utilities and Industrials, that is already the third Consensus favourite in three months.

Barometer: Cutting back on equities as financial conditions offer less support, November 2026↗

House View: Candriam

Candriam, finalist for the Sectors Award and the Fixed Income Award, sees the inflation too: euro area inflation expectations are at their highest level since 2023. Still, its central scenario assumes “limited additional tightening”. Candriam stays slightly overweight equities and has held long duration in core European government bonds since September. Inflation fears, yes. Many more rate hikes, no.

Coffee Break: The Midterm test, November 2026↗

What It Means for the Consensus

With equities ranked second of the 25 asset classes we track (71% overweight), the Consensus is clearly risk-on; Pictet is moving away from that. Candriam stays overweight equities, but goes against the Consensus on government bonds, which it holds underweight (rank 21). Both expect fewer rate hikes than the market, but they are not moving together. So this is not yet an early signal.

The consensus, based on 67 Tactical Asset Allocation reports in October, still points to risk-on for November: 71.2% of asset managers are overweight equities, while half are underweight bonds and 58% are underweight cash.

What is changing are the arguments behind these recommendations. After reading these 67 reports and ranking all the arguments, inflation fears turn out to top our macro ranking for the first time. This ranking measures how often a theme is mentioned, but also how it influences the recommendations being made. Of the 43 asset managers writing about inflation, there are 40 where inflation clearly influences their view.

For most asset managers, the genie now really seems to be out of the bottle. The three largest central banks (Fed, ECB and BoJ) all raised their policy rates in September, and yet US core inflation (core PCE) stands at 3.3% and eurozone inflation at 3.8%. A rate hike may slow demand, but the number of oil tankers passing through the Strait of Hormuz is problematically low.

The Macro Theme ranking shows another shift. Hormuz drops to 7th place and the oil price stays in 8th, which indicates that their impact on portfolio adjustments has become less relevant. The impact has not gone away, but has moved from the energy bill to core inflation.

In second place are rising long-term yields and fiscal pressure, and that is where inflation increasingly becomes a budget problem. According to the CBO, Washington paid $1.14 trillion in net interest in fiscal year 2026: more than on Medicare ($1.07 trillion) and over $200 billion more than on defense.

Interest costs grew 11%, and that is more than twice as fast as the defense budget. These higher deficits require more government bond issuance, and more issuance pushes long-term yields higher. In September, the 10-year US Treasury yield rose above 5.2%.

Yet asset allocators are not buying inflation-linked bonds. Inflation-linked bonds remain neutral among strategists and CIOs with a view for the next three to 12 months. The consensus seems to turn against bonds, but not specifically when it comes to short duration. What is clear is that returns are mainly being sought in equities and commodities.

If we zoom in on the camp that finds inflation fears overdone, you end up at disinflation. There you read more about “as supply shocks fade” (J.P. Morgan) and that the priced-in Fed hikes are “excessive” (BlackRock) and “overly aggressive” (DWS). The market seemed to agree with them in October, as the 10-year yield fell globally. And at current rate levels, government bonds are suddenly a cheap corner of the portfolio.

The genie is out of the bottle, and asset managers are no longer trying to push it back in. They let it work for them, with equities and commodities. As long as core inflation stays above 3%, the bottle stays open and the consensus stays risk-on.

New to this? Asset managers are slowly starting to see risks in higher inflation and rising interest rates. The consensus is that the best protection against these risks is still equities and commodities, rather than bonds.

Two equity specialists from the Asset Allocation Awards panel close out October with the same preference: US equities, carried by technology.

ING Investment Office is moving towards the Consensus and L&G AM expresses the view as a relative position against Europe. The most striking signal lies elsewhere, in government bonds.

House View: ING Investment Office
ING Investment Office, winner of the 2026 Equities Regional Award, upgrades US Equities from neutral to overweight in its Maandbericht beleggen november 2026↗ of 28 October. ING describes the US market as relatively defensive, while it also has heavy exposure to technology, a sector the house remains positive on. The money comes from Pacific ex-Japan, where low earnings growth meets high valuations. Protection and growth, in a single position.

House View: L&G AM
L&G AM, finalist for the Equities Regional Award, increased its equity exposure after the flare-up of the Middle East conflict and is now overweight. Within equities the choice is clear: long Nasdaq 100 against Europe and the UK, because “tech-heavy US equities can reassert leadership”. Investment Grade Bonds is strongly underweight, while government bonds stay neutral. L&G AM takes risk in equities, and explicitly not in credit…
Navigating crosscurrents, Asset Allocation Outlook Q4 2026↗

What it means for the Consensus
On the US, ING joins the Consensus, where US equities rank 4th out of 25 asset classes. On government bonds, part of the panel is moving ahead. After T. Rowe Price and Invesco, ING is now also reducing its underweight, while the Consensus still ranks government bonds 21st.

Today October ends. Next week we publish the November Asset Allocation Consensus, with an update of all recommendations, the arguments behind them and the ranking of the macro themes. Then we will see whether government bonds mark an early turning point or an exception.

Three finalists of the Asset Allocation Awards published a tactical asset allocation view in recent weeks, and two of them are reducing their underweight in bonds just as the Consensus cuts government bonds from neutral to underweight. T. Rowe Price and Invesco are thereby moving against the Consensus. On equities these specialists diverge: T. Rowe Price and Candriam turned more positive, while Invesco became more cautious. Notably, France runs through all three reports.

House View: T. Rowe Price

T. Rowe Price, finalist for the Equities Regional Award and the Overall Award, lets go of the two positions that four weeks ago put it furthest from the Consensus: cash and global high yield move from overweight to neutral. Cash remains “reasonably attractive”, but now funds more equities and a smaller underweight in bonds, mainly European government bonds. The argument is France: the European Central Bank (ECB) will therefore tighten less than the market prices in.

Global Asset Allocation: The View From Europe, October 2026↗

House View: Candriam

Candriam, finalist for the Sectors Award and the Fixed Income Award, raises US equities from neutral to a slight overweight. The case comes from its own sector map: information technology moved to a strategic overweight at the end of September, as did communication services. The asset manager is “willing to carry an overweight equity exposure”, but the earnings season has to justify it.

Monthly Coffee Break: Earnings take centre stage, October 2026↗
Monthly Coffee Break: The earnings test, October 2026↗

House View: Invesco

Invesco, winner of the Sectors Award and finalist for the Fixed Income Award, turns its model portfolio the other way: fewer equities from Europe ex-UK and Japan, and more Japanese government bonds and investment grade corporate bonds. Equities remain overweight, bonds underweight. On France, Paul Jackson is patient: the spread looks attractive, but “It may be too soon to buy.”

Uncommon truths: Too soon to buy French bonds, October 2026↗

What It Means for the Consensus

Two finalists independently reduce their bond underweight, just as the Consensus cuts government bonds to underweight (rank 21 of 25). An early signal, against the tide. On high yield, T. Rowe Price lands where the Consensus now sits: neutral. On equities, number two in the Consensus, the panel is split.

1 Oct 2026: Ewout van Schaick and Valentijn van Nieuwenhuizen in conversation with Eelco Ubbels.

It is still risk on. In a live conversation on 1 October, Valentijn van Nieuwenhuizen and Ewout van Schaick agreed with the 67 asset managers in the October Asset Allocation Consensus, in which equities remain at the top as the overweight asset class.

But dig a little deeper and you hear two very different reasons not to get out yet. Van Nieuwenhuizen puts the risk stories into perspective; in his view, they have been given too much weight for 25 years. Van Schaick sees “real problems down the road”, but sticks to an investment process that prevents him from turning negative too early.

And on the theme rising fastest in the reports this month, inflation fears, they disagree.

Two independent voices

Van Nieuwenhuizen and Van Schaick jointly built the multi-asset team at ING Investment Management, later NN Investment Partners, from 2006–2008 onwards. Van Nieuwenhuizen worked at ING and NN for 25 years, ended up as CIO of NN IP and led the transition after the sale to Goldman Sachs. For the past two years he has been an independent investment strategist, adviser, columnist and speaker.

Until October 2025, Van Schaick was Managing Director Multi Asset Solutions at Goldman Sachs, and before that Head of Multi Asset at NN IP for five years. Ewout is currently still enjoying a sabbatical, but remains closely involved in the investment world through various other activities, including a board position at a charity and a weekly podcast, ‘Het Marktmechanisme’ (‘The Market Mechanism’), which he makes together with Valentijn van Nieuwenhuizen.

That independence comes through. “In a corporate role you never spoke too explicitly about political figures or about your own parent company,” says Van Nieuwenhuizen. “Now you can add a bit more colour.”

The optimist: ‘look at what you could have earned since Crimea’

“When I look at how I structure my own portfolio, I remain largely allocated to higher-return sources, such as equities,” says Van Nieuwenhuizen. He bases this on two pillars: strong economic momentum, in both growth and corporate earnings, and an environment of high nominal growth. The latter supports equities over the long term, although there will also be fluctuations in the short term. He does see the risks: oil, rising interest rates, a possible AI bubble. He just deliberately gives them less weight.

“Over the past 25 years I have heard many times that the risks are bigger than ever before. That was also in every broker report when Russia invaded Crimea in 2014. Just look at the returns you could have made since then.”

Anyone who listens too much to risk stories, he argues, more often misses the returns that simply keep coming than actually profits from a crisis. Still, he is tilting his portfolio somewhat more defensively, with more bonds, and this is where he departs from the consensus. In October, government bonds dropped to last place in the bond ranking of Alpha Research’s Asset Allocation Consensus. Van Nieuwenhuizen: “Because of all the recent turmoil, bonds have become more attractive than they have been in the past five years. In recent years they hardly had a role in a smart multi-asset portfolio, but now they once again offer real diversification benefits.”

The worrier: ‘in the past I would have sold everything’

Van Schaick is “somewhat more cautious”, but for now arrives at the same positioning. In his view, the strong economic picture rests on two engines that will not keep running forever. The first is fiscal stimulus, which is now also leading to large government deficits worldwide. The second is the massive investment in AI, which he says will account for around 3% of US GDP in 2027. He sees the fact that the bond market is also worried as confirmation of the risks. Even so, he is not (yet) getting out of equities, he acknowledges with some self-reflection.

“If you had asked me five or ten years ago how I was positioned in the face of such risks, I would probably have said: I’ve sold everything. But with strong momentum and a great fear among investors of getting out too early, you know that the best returns of a rally often come in the final phase. That should stop you from turning negative too early.”

The process he set up with Van Nieuwenhuizen at NN IP, in which figures on economic growth, inflation and earnings growth are always combined with an in-depth analysis of market behaviour and investor sentiment, is keeping him invested in the market for now. He does see momentum starting to falter, however, as a large number of stocks have been moving sideways for months. He also sees high valuations, and fundamental concerns about public finances and the AI capex boom: “We are getting closer to a tipping point.” That is why he is keeping a close eye on what he calls “the canaries in the coal mine”. “If things escalate quickly and you’re not ready to react, you end up like a rabbit staring into the headlights of an oncoming car.”

AI is pulling the cart, and that is also the risk

Van Nieuwenhuizen certainly sees potential in emerging markets, but also adds a caveat. South Korea and Taiwan together make up around 40% of the emerging markets index. “Take those out, and there isn’t much excitement left this year.” In equity terms, investing in emerging markets is largely a bet on the global AI theme.

Van Schaick is concerned that the equity market is so heavily dependent on the AI sector. Earlier this year the AI and IT trend briefly faltered, and more defensive parts of the market took over the baton, such as healthcare, dividend stocks and Europe. “At that moment, I actually found that reassuring.” But now technology is once again pulling the market up almost single-handedly. “We are very dependent on the tech sector.”

Van Nieuwenhuizen also sees the positive side. Torsten Slok, chief economist at Apollo, showed that executives in all sectors talk about AI in earnings calls far more often than a year ago. That may of course be window dressing, but it may also point to the real bull case.

“The real bull case is that we start using AI outside the tech sector as well, to become more productive. I’ll believe it when I see it. But if over the next three to five years AI widens margins in other sectors, that will be a support for the market.”

Inflation fears: a peak in anxiety?

No macro theme rose as sharply in the reports this month as inflation fears, which climbed from sixth to second place. Only the AI investment cycle is mentioned more often. On what this means, the two disagree.

Van Schaick describes a perfect storm. Inflation has been above central banks’ targets ever since Covid. On top of that come the war in Ukraine, tensions in the Middle East, tight labour markets and AI data centres pushing up the prices of chips and building materials. The key question, in his view, is whether wages keep rising and thereby fuel inflation further.

Van Nieuwenhuizen agrees that inflation is partly a cause of higher interest rates, but he also points out that the bond market is really not panicking. He points to the inflation expectations priced into bond markets. In the US, Europe and Japan these have barely risen and are very close to central banks’ targets.

“The bond market is mainly ‘pricing in’ that central banks need to do more to keep inflation under control, but not that it is becoming more likely that inflation will spiral out of control in the coming years. I wouldn’t rule out that we are close to peak inflation anxiety in the coming months.”

There is also simple arithmetic at play. Inflation measures the rise in prices compared with a year earlier. An oil price that has doubled would have to double again a year later to have the same effect. “If oil doesn’t rise above 120 dollars between now and March, from March onwards you get a neutral to dampening impact on inflation.”

Van Schaick sees the rise in interest rates as structural. The large US budget deficit and France’s financing problems were already known. Globally, there is a lack of willingness to do anything about deficits. What is new is that the big tech companies also have to borrow enormous sums for their data centres, while a lot of government debt has to be refinanced at higher rates.

“It’s never one factor. Governments need money, the hyperscalers need a lot of money, and interest rates are rising just when all sorts of problems have to be absorbed. It’s a cocktail, and at some point that cocktail ignites.”

What could upset the picture

Both strategists themselves name the signals that could undermine their risk-on stance. For Van Schaick, it is the credit market:

“What will be exciting in the coming months is whether higher interest rates also lead to higher credit spreads. That’s when it really becomes unpleasant if you have to borrow money as a company or as a less creditworthy government.”

In doing so, he is warning precisely where the Consensus is moving in the other direction: high-yield bonds rose one place in the ranking this month. For Van Nieuwenhuizen, the line lies at the oil price. If it rises above 120 dollars before March, his argument for a peak in inflation no longer holds. And for both of them: as long as the market hangs on a single sector, momentum in the big tech stocks can fade faster than a portfolio can be turned around.

Still risk on, then, but ready to brake…

The fourth quarter kicks off with asset allocation reports from three finalists of the Asset Allocation Awards. These asset managers share the same interpretation regarding the first US interest rate hike in over three years: markets are pricing in more hikes than the managers anticipate will actually occur. Amundi, however, is the only one acting on this view. Meanwhile, Pictet Asset Management is implementing the week’s only rating changes, once again going against the consensus.

House view: Pictet Asset Management

Pictet Asset Management, a finalist for this year’s Sectors Award, is downgrading its recommendation for the industrial sector from ‘overweight’ to ‘neutral’ to avoid excessive exposure to “the most energy-intensive and interest-rate-sensitive parts of the economy.” The consensus recommends ‘overweight’ for the industrial sector (ranking 6th out of 25 sub-asset classes). The utilities sector was downgraded last month. The consumer discretionary sector, rated ‘underweight’ by the consensus, is now moving to ‘neutral’. For the second month in a row, the sector specialist is diverging from the consensus position.

Barometer: Equities remain on track despite high valuations, October 2026↗

House view: Amundi

Amundi, a finalist for the Fixed Income Award, views the Fed’s interest rate hike as an insurance measure and a matter of credibility, rather than the start of a new tightening cycle. According to Amundi, the market is pricing in “too many interest rate hikes by central banks.” Tactically, the asset manager is therefore slightly increasing duration in the United States and the eurozone; the official recommendation remains slightly positive. Amundi is the only one of the three to back its words with action, translating its analysis into changes to actual recommendations.

Global investment outlook, October 2026 ↗

House view: Northern Trust Asset Management

Northern Trust Asset Management, a finalist for the Asset Allocation Award, shares this view: the Fed is “adjusting the dials, not turning the screws.” Only a tightening of more than 125 basis points within a year would signal a genuine shift in policy. Nevertheless, duration remains neutral, as US Treasury yields are close to the firm’s own fair value estimates. For Northern Trust, therefore, an aggressive Fed move is not yet a reason to buy.

Investment Perspectives, Interest rate recalibration, not policy tightening – October 2026 ↗

Implications for the consensus

Pictet and Northern Trust AM maintain a neutral position on government bonds, exactly in line with the consensus (ranked 20th out of 25, with 22% overweight). Only Amundi is slightly ahead of the curve. At the sector level, Pictet diverges: the consensus still holds an overweight position in the industrial sector. There is no early signal this week; for the time being, no one else is following suit.

Based on the Asset Allocation Consensus of September 2026 and conversations with the three Award winners in September and October 2026.

Two dominant themes, one new rate regime

Since late August, the scope of our consensus on asset allocation has clearly broadened. While investments in AI remain the dominant theme, they have gained a formidable rival: geopolitics, driven by energy.

Renewed tensions surrounding Iran and the Strait of Hormuz have pushed the price of oil back above $100 per barrel; 87.2% of the 39 companies in our September panel now cite this as a defining issue, a figure barely lower than the 89.7% that continue to point to investments in AI.

Something more fundamental is happening in the bond market: a genuine shift in the policy climate. Under new Fed Chair Kevin Warsh, market sentiment has swung from expecting rate cuts to anticipating a ‘hawkish’ stance of maintaining interest rates; 87.2% of firms identified this as a key theme. While our duration reading remained stable at ‘neutral’ in August (38.9% overweight versus 38.9% underweight), it shifted clearly to ‘underweight’ in September (23.1% overweight versus 57.7% underweight), marking the sharpest one-month shift since we began tracking these figures.

What prevents this from being a classic 'risk-off' signal is the overall picture. In fact, equities are increasingly being overweight-positioned (74.1% overweight versus 1.9% underweight), gold is moving closer to 50% overweight and 0% underweight, and within the equity market, AI-related capital expenditure (capex) is broadening from chips to physical infrastructure; meanwhile, utilities stand at 57.1% overweight in our consensus this month.

As a result, the picture has become sharper rather than more blurred: equities are overweight, bonds and duration are underweight, and investments in AI are more broadly diversified than ever. Turning to geopolitics, that is now a factor of equal weight.

Consensus mainly tells you where the majority stands. Our own Asset Allocation Consensus surveys that majority every month among 60+ institutional asset managers worldwide, and that is exactly the benchmark against which we compare the three winners below. At least as interesting is where successful asset allocators deliberately diverge from that majority. So we put the same market picture to three winners of the 2026 Asset Allocation Awards: Federated Hermes, Invesco, and ING Investment Office. All three recognize major parts of the consensus, but within their own specialty, they make slightly different choices.

Federated Hermes: “I’m not worried about higher rates”

Steve Chiavarone, CIO, Global Equities at Federated Hermes, doesn’t automatically see higher rates as a problem. Federated Hermes won our Fixed Income Award this year. “I’m not worried about higher rates,” he says. “Rather than be a story about runaway inflation, this is a normalization of rates to a higher structural growth environment. That’s a positive thing.” That puts him in line with three of the factors behind higher long-term rates cited elsewhere too: stronger growth, more competition for capital, and geopolitical uncertainty.

For Federated Hermes, the real question is where on the yield curve you take that risk.

The short end of the curve

Chiavarone sees the most value at the short end. “We’re willing to take credit risk on the short end of the curve. We tend to like investment grade credits right here,” he says. Further out the curve, toward the belly, the story becomes less compelling: yields of 4.5 to 5% strike him as fairly priced, and spreads there are too tight for his taste. That’s precisely where Federated Hermes prefers to stay on the sidelines.

Equity income instead of High Yield

On High Yield, Federated Hermes is close to our own consensus, we too are net Underweight there. The interesting difference is what Chiavarone buys instead: “Equity income makes more sense than low quality fixed income when inflation is a greater concern than growth.” Rather than take on extra credit risk in High Yield, he’d rather find that income in high-quality, dividend-paying equities, a slightly different route to the same destination.

Emerging Markets Debt: where the real gap appears

It’s only on Emerging Markets Debt that Federated Hermes truly diverges: Chiavarone is tactically neutral here, against a consensus of 72 asset managers that stands net 52.7% Overweight and just 7.3% Underweight, a gap of more than 45 percentage points. He immediately adds a caveat of his own: Federated Hermes runs structurally overweight emerging markets in many portfolios, so a tactically neutral position doesn’t automatically mean a low absolute allocation.

The risk he himself flags most strongly, incidentally, doesn’t lie in the present but further out: that the current AI infrastructure build-out overheats on the way to 2028 and triggers a setback afterward.

Invesco: convinced on AI capex, but not automatically on Technology

Invesco’s response came in writing, from Investment Strategist András Vig, who works in the team of chief strategist Paul Jackson (Global Market Strategist EMEA and winner of the Equities Sectors Award).

Mid-cycle, with rates as the biggest risk

Vig still places the economy in the mid-cycle phase, moving toward late-cycle. “My view remains that we are in the mid-cycle phase, approaching late-cycle, so growth should still be positive supporting risk assets,” he says. For the next twelve months, though, he sees the rise in government bond yields as the bigger risk: “I can easily imagine a scenario where higher borrowing costs restrict some of the spending that has been planned in the next 12 months both for governments and corporate borrowers.” Short-duration assets, he adds, “may be less sensitive to further increases in yields than long-duration assets, especially if yields rise further and central banks continue tightening.”

Gold: closer to neutral

Invesco also diverges from our consensus on gold. While the Overweight on gold in our consensus has only strengthened further in recent months, Vig stays closer to Neutral: “Although there is some upside from current levels, I would be closer to Neutral on gold with some support from a weaker US dollar, but higher real yields tend to work against gold.”

Technology: the structural story holds, valuation is harder

Within his own Award category, the gap with the consensus becomes much clearer. Our sector consensus is very strongly Overweight on Technology — 78.6% Overweight versus 0% Underweight, the strongest signal in our entire dataset — while Invesco holds the sector at Neutral: a gap of nearly 79 percentage points.

That’s not because Vig rejects the AI story itself. “The Neutral view is predicated on my thinking that the structural growth story with the capital expenditure cycle is still intact, although I think that markets are still pricing in a faster pace of earnings growth than what is most likely, in my view,” he says. He points to a number of real constraints: data centre construction faces physical and regulatory hurdles even where demand exists; pricing still has some way to go before it catches up with the cost of compute, meaning either models need to become significantly more efficient or prices need to rise — which could in turn dampen demand; and financing the build-out through debt issuance could eventually run into higher interest rates as a constraint.

So the difference with the consensus isn’t about AI or no AI, but about the price investors are already paying for it.

Utilities: same theme, different valuation

On Utilities, Invesco is actually close to our consensus. “I think they could be boosted by the structural growth story with the data centre build-out and tended to have a positive correlation with energy prices, so there are a couple of tailwinds,” Vig says. He does see a clear counterforce: “rising yields could put pressure on the sector both as it being a ‘bond proxy’ and as a highly leveraged sector where interest costs may rise.” Even so, he adds, the sector could act as a diversifier in this environment — both against rising energy prices and a potential slowdown in the global economy.

Beyond that, Vig sees potential mostly in late-cyclicals: “industrials and basic resources that tended to outperform in the mature phase of market expansions,” alongside financials, which “also look attractive with relative valuations not stretched and as long as interest rates stay high, consumer loan demand and spending remain resilient, and the investment banking cycle stays strong.” He is more cautious on consumer discretionary, where “rising inflation may reduce spending power through lower real wage growth,” and on telecoms, which he sees as having already benefited from AI-driven demand and now facing more risk.

Energy: a bet on persistent Gulf tension

On Energy, Invesco is Overweight, against a consensus that stands slightly Underweight — and this time with an explicit rationale that connects directly to the geopolitical theme this article opens with: “My Overweight assumes that the US-Iran conflict remains unresolved and the Strait of Hormuz stays only partially open. There remains a risk of flare-ups and attacks on infrastructure that could constrain Gulf oil producers’ ability to supply customers. The destruction of infrastructure in Russia also increases margins for refiners.”

Two separate drivers, then: persistent supply risk via the Gulf, and higher refining margins from the loss of Russian capacity. Both amount to the same thing — a positioning that assumes the current tension isn’t a temporary phenomenon, but the new normal.

ING Investment Office: the US and Japan diverge, on EM ING sides with the consensus

ING Investment Office, winner of the Equity Regional Award, responds through Bob Homan (Global Chief Investment Officer) and Simon Wiersma (Investment Manager, Chief Investment Strategist). They recognize much of the macro picture: the combination of heavy AI investment, higher energy prices, and less accommodative monetary policy does, in their view, form an important market dynamic, and higher energy prices can make inflation more persistent, limiting room for rate cuts.

Resilient earnings, despite the geopolitics

Still, ING warns against focusing too one-sidedly on geopolitical risks: “At the same time, we think it’s important not to look exclusively at geopolitical risks. The past few quarters have shown that equity markets remain remarkably resilient as long as earnings growth stays strong.” AI plays an important role in that, according to ING, not just within Technology but just as much via industrials, utilities, and infrastructure.

Carry over duration, and a different view on gold

Within bonds, ING stays cautious on duration: “Carry remains a more important source of income for investors than duration.” Investment-grade corporate bonds, High Yield, and Emerging Markets Debt currently offer a more attractive risk-return profile than government bonds, in the bank’s view, though rising real yields are gradually making government bonds more interesting again too.

On gold, ING is closer to our consensus than Invesco. Demand, in ING’s view, is driven not only by geopolitical uncertainty but also by central bank buying, fiscal deficits, and reserve diversification, which is why the bank sees gold mainly as “an effective diversifier within a portfolio, rather than as a direct competitor to equities.” Their scenario is therefore not a classic risk-off environment, but rather a period in which higher rates persist for longer while earnings growth stays strong enough to support equities.

The US: positive, but not Overweight

Within the Equity Regional Award, the gap with the consensus becomes concrete. ING positions North America at Neutral, against a consensus of 72 asset managers that stands net 51.6 percentage points Overweight there (56.5% Overweight versus 4.8% Underweight), the strongest regional preference in our entire dataset.

“The neutral position in US equities was, and is, not a negative view on the US. Quite the opposite,” ING emphasizes. The US market benefits strongly from AI, innovation, and earnings growth, in the bank’s view; the caution lies mainly in valuation. A lot of good news is already in the price, and a higher long-term rate makes it harder to justify further multiple expansion, a richer valuation per unit of earnings.

Japan: more positive, but not yet Overweight

On Japan, ING has actually grown more constructive in recent months: the position moved from Underweight to Neutral, supported by improving earnings and Japan’s growing role in the global AI supply chain, from robotics to semiconductor equipment. Still, the bank remains more cautious than our consensus, which stands net 21.7 percentage points Overweight on Japan, it’s mainly the risk of a much stronger yen that keeps ING from raising the position further.

Emerging Markets: strong conviction, but not a contrarian call

Emerging Markets remain ING’s most important regional Overweight, supported by earnings growth and valuations that are more attractive than in many developed markets. AI plays a role here too: Taiwan, South Korea, and parts of China are indispensable links in the global semiconductor chain, and the region also offers diversification away from the heavily concentrated US technology sector.

What makes that conviction interesting is that it’s hardly contrarian at all: our own consensus is itself already just as strongly Overweight on Emerging Markets, at a net 61.5 percentage points. So the real difference between ING and the rest of the market lies far less in Emerging Markets than in the US and Japan.

What could upend this picture?

The risks the three flag themselves diverge too. For Invesco, it’s mainly a financing bottleneck: if long rates stay high while both governments and companies need more capital, that becomes a problem, and, notably, the same firm, through its Energy position, is also the one positioned most firmly for persistent geopolitical tension. For ING, a much stronger yen could undermine the appeal of Japanese equities. And Federated Hermes looks further out, to a risk that still seems distant today: that the AI infrastructure build-out overheats on the way to 2028 and causes a setback afterward.

Consensus is the starting point, not the portfolio

What stands out most is that none of these three Award winners simply contradicts the consensus. At the macro level, they recognize largely the same regime, higher rates, resilient equity markets, an ever-broadening AI investment cycle. The difference only emerges in the next step: the translation into actual positions.

And that’s exactly where asset allocation gets genuinely interesting: in the question of where you then actually take risk, and where you deliberately choose not to, not in simply recognizing the dominant theme.

Our thanks to ING Investment Office, Invesco, and Federated Hermes for their time and openness. All three won their category at the eleventh edition of the Asset Allocation Awards, held this past February. We’re now well past the halfway point of the new cycle: nominees for the twelfth edition will be announced in November, with the awards themselves taking place on Thursday, 28 January 2027, in Amsterdam.

In the space of a single month, the topic of inflation has evolved from a belief to a given. In September, this topic was addressed in 72 per cent of reports containing new analyses. In October, the figure was almost 98 per cent. Concerns about inflation have risen from sixth place to joint second place in the Asset Allocation Consensus, based on 67 recent reports.

The signal for October: positive for growth, negative for bonds.

For each theme, we measure how many reports cover it (breadth) and what proportion of these link the theme to a specific investment decision (action ratio). The score is then calculated as the breadth multiplied by the action ratio. Macro themes are assessed solely on the basis of reports from September; this month, 44 out of 67, compared with 39 in September.

Little has changed at the top. The AI investment cycle has risen to 90.91, and this is highlighted in virtually every report. The debate has now shifted to scale, funding and valuation. Several reports estimate that hyperscalers’ spending this year will run into the hundreds of billions, with projections for 2027 of nearly 1 trillion dollars.

This money is flowing not only into the technology sector, but also into semiconductors, electricity grids, utility companies, copper and the Asian chip supply chain. It is striking that an ever-increasing proportion is being financed through debt, which means that even loans with an ‘investment grade’ rating are being drawn into the AI narrative.

As far as inflation is concerned, the market is almost fully priced in, and the action ratio has fallen from around 96 per cent to 88 per cent. Nevertheless, there are now 38 reports, compared with 27 in September. What was initially the firm conviction of a small group of asset managers is now an assumption shared by almost everyone. Persistent inflation does, however, limit the scope for interest rate cuts, meaning the consensus remains cautious regarding government bonds with a long duration.

The role of bonds in diversifying a portfolio is also less self-evident, as, logically, an inflationary shock affects both shares and bonds at the same time.

The conflict in the Middle East is developing in the opposite direction. Almost 89 per cent of the updated reports still focus on Hormuz, but the number responding to this has fallen from 34 to 30. The theme has slipped from joint first place to fifth this month.

The sharpest decline in the table is seen in the oil price: from 71.79 to 38.64. The conflict has shifted from being a direct trigger for portfolio adjustments to a background risk.

The other camp: not every report mentioning inflation actually leads to action. Five of the 43 reports highlight the risk but do not alter their bond recommendations. Moreover, the geopolitical risk itself remains unchanged; oil supply and the escalation in the Middle East continue to have a direct impact on inflation and growth.

Something to watch: the price of oil. A fresh escalation around the Strait of Hormuz would immediately bring the risk—currently lurking in the background—back to the forefront. This would instantly reignite concerns about inflation, which are already ranking second in importance. Inflation has clearly shifted from mere conversation to investment portfolios. The situation surrounding Hormuz is once again moving in the opposite direction. Talk is cheap, but in the bond market, discussions about inflation rarely go without consequences for long.

New to this? Virtually every serious investor is talking about inflation this month, making bonds a less obvious safe haven. If you are saving or investing for the long term, this affects the interest you receive and the risk you run.

One winner and two finalists of the Asset Allocation Awards 2026 interpret this week’s rising interest rates in the same way but draw three different conclusions. UBS Asset Management views higher bond yields as a return to normal and is increasing its allocation to government bonds. T. Rowe Price combines cash with high-yield bonds, and focusing on HY short durations. ING Investment Office deviates somewhat from the consensus regarding equities: neutral where the consensus is overweight...

House View: UBS Asset Management

UBS Asset Management, a finalist for the Fixed Income Award and the Overall Award, has raised its recommendation for global government bonds from “neutral” to “overweight”: “We prefer to buy global duration on price dips. U.S. government bonds, however, remain at ‘neutral.” UBS buys duration where growth is most vulnerable, not in the strongest economy.

Macro Quarterly Q4 2026, Bonds: Normal for Longer, September 2026↗

House View: T. Rowe Price

T. Rowe Price, a finalist for the Equities Regional Award and the Overall Award, largely follows the consensus when it comes to equity regions; the difference lies in fixed-income securities. The company is cautious regarding duration and combines two positions where the consensus is underweight: cash and high yield. Cash is overweight, reflecting a negative view on government bonds: “The yield on cash remains reasonably attractive.” High yield is overweight due to healthy fundamentals with a focus on short duration.

Global Asset Allocation: The view from Europe, September 2026↗

House View: ING Investment Office

ING Investment Office, winner of the Equities Regional Award and, with 11 nominations over the past 11 years, a highly successful investor, takes a more cautious stance than the consensus. It is neutral on equities, North America, and Japan, where the consensus maintains an overweight position. The monthly report does not address this on a region-by-region basis. However, it does explain the reason for the neutral stance on equities in general: the equity risk premium is at “the lowest level in more than twenty years” (translated from Dutch). This asset allocation team has shown in the past that a neutral stance does not necessarily have to turn out badly.

Maandbericht Beleggen Oktober 2026↗

What this means for the consensus

Nevertheless, T. Rowe Price and ING Investment Office see one way out: both are overweight in high yield based on the same argument, namely “Short Duration High Yield.” The consensus is underweight High Yield and the asset class is ranked 22nd out of 25 asset classes. That is an early signal. As for government bonds, UBS is ahead of the consensus, which is neutral with only 22% of its recommendations at overweight.

Looking at this week’s updates from two award-winning asset managers, the focus is on the Federal Reserve: it raised interest rates on Wednesday, the first hike since 2023. UBP, winner of the Asset Allocation Award and the Overall Award earlier this year, maintains a neutral stance on equities and fixed-income securities. Federated Hermes, winner of the Fixed Income Award, aligns with the consensus, recommending an overweight position in equities and an underweight position in fixed income.

House View: UBP

UBP, a two-time winner of the Asset Allocation Awards, maintains its neutral rating for equities and fixed-income securities; we note that the report was published prior to the interest rate hike. Due to persistent inflation, with oil prices being a key factor, the yield on 10-year government bonds was hovering around 4.75% at the time. UBP warned that “a return to tighter financial conditions would mark a genuine regime shift.” The next report in October will reveal whether last Wednesday’s events were significant in terms of changes to asset allocation recommendations.

UBP House View, September 2026↗

House View: Federated Hermes

Federated Hermes, winner of the Fixed Income Award and a finalist for the Asset Allocation Award in 2026, aligns its meeting cycle with that of the Federal Reserve, and its PRISM model remained unchanged following Wednesday’s interest rate hike. It currently has an overweight position in stocks and an underweight position in bonds. Steven Chiavarone, the Chief Investment Officer, raised the 2026 earnings forecast for the S&P 500 from $340 to $370 on September 9, and would “likely view a short-term correction as a buying opportunity.”

Still up and to the right, September 2026↗

What This Means for the Consensus

Federated Hermes aligns with the consensus: overweight in stocks and underweight in bonds. UBP is neutral on both stocks and bonds. With the Fed’s interest rate hike, we’ll see next month whether these successful asset managers make any adjustments. Looking now at the consensus for stocks, 74.1% of the recommendations are overweight. Given that UBP and Federated Hermes have not made any adjustments, a positive outlook on the stock market seems justified.

Reading across three finalists from the Asset Allocation Awards’ thirteen-strong panel this week, the debate isn’t about direction, it’s about which safe assets still deserve the label. Robeco cools on commodities. Amundi holds its ground on fixed income broadly. Candriam goes further, leaning into government bonds almost alone. All three, in their own way, are choosing quality over the crowd.

House View: Robeco

Robeco, finalist for the Asset Allocation Award, has gone flat on Commodities, putting it at odds with a Consensus rating the category Overwogen (net +22.58%, ranked 9th of 25). The reason is narrower than it looks: “We remain cautious but neutral on oil, unable to predict the likelihood of skirmishes between the US and Iran...” the house explains. Gold, a separate line, keeps climbing.

Multi-asset market outlook, September 2026↗

House View: Amundi

Amundi, finalist for the Fixed Income Award, keeps an overall positive rating on both Duration and Credit, against a Consensus that rates Bonds Onderwogen (net −28.2%, ranked 23rd of 25). “We remain mildly constructive on this asset class, in particular high-quality credit,” the house notes, favouring Global Investment Grade on an all-in yield basis. A more dovish Fed and ECB support the duration call.

Global Investment Views, September 2026↗

House View: Candriam

The most contrarian call this week belongs to Candriam, finalist for the Fixed Income Award: long Core European government bond duration, where the Consensus sits at Neutraal with just 22% overweight (net −18.52%, ranked 20th of 25). “The Iran war has led to an inflation-driven repricing... we focus on high quality, core-European AAA-rated sovereign bonds, which enjoy both fiscal and central bank credibility.”

Coffee Break, 7 September 2026↗

What It Means for the Consensus

Two of three finalists find something to like in fixed income, Amundi across duration and credit, Candriam narrowly in core European government bonds, even as the Consensus keeps Bonds Onderwogen (rank 23/25) and Government Bonds Neutraal (rank 20/25). Robeco stands apart: neutral on Commodities, where the Consensus stays Overwogen.

Government bonds are supposed to be the insurance policy against falling equity markets. They no longer offer that. And the category ranked least attractive of the five in this month’s consensus is the best-performing fixed income asset class of the year.

Within fixed income, High Yield ranks last this month. Five categories, one ranking: Emerging Markets Debt overweight, Inflation Linked Bonds and Corporate Bonds neutral, Government Bonds neutral with a slight improvement, and High Yield at the bottom, underweight, unchanged from last month. Spreads confirm the picture. On August 31, the U.S. HY spread stood at 2.65%, the European spread at 2.63%. Two regions, nearly identical levels, both close to the cycle’s low.

Source: FRED

Source: FRED

Two layers, two choices

The allocation decision around High Yield plays out on two levels. At the top, whether the risk budget goes to equities or to credit: HY has traditionally correlated closely with equities, so choosing credit often means buying a diluted version of the same risk. Below that, within fixed income itself, which slice of that risk you want to carry. Rate view and duration on one side, credit risk on the other.

Buying government bonds now means buying duration without much compensation. High Yield asks for the opposite trade: credit risk, at a price that’s historically low.

That second choice is exactly what makes this month’s ranking legible. EMD is favored because it offers a return that’s missing elsewhere, Inflation Linked Bonds remain insurance against a scenario nobody rules out. High Yield bears the compensation problem hardest.

What the equity market is saying

The cross-asset signal comes from the equity market. As long as equities keep structurally climbing, demand for corporate risk stays high, and that compresses the compensation investors demand for carrying the same risk through credit. Steve Chiavarone, Deputy CIO Equities at Federated Hermes, winner of the Fixed Income Award at the Asset Allocation Awards, made exactly this case in this magazine in July: when spread on the riskier parts of fixed income isn’t sufficient, the risk budget moves into equities. What was a tactical call at Federated Hermes now shows up broadly in the High Yield ranking. Equities send, credit receives, and the message is simple: a cheaper alternative exists for this level of risk.

Government bonds play into this too. Northern Trust points out that bonds are losing their diversification benefit, they now move more closely with equities than they did in the decade after the financial crisis. Buying duration as protection therefore buys less protection than before. That makes the choice within fixed income harder than it was a year ago.

The case for and against

Bull case: 7 of the 58 managers with a view on High Yield are overweight, 12.1%. The argument is largely technical. Low duration and an attractive running yield, as ING Investment Office and T. Rowe Price both stress. MFS points to all-in yields above 7% in the U.S. Standard Chartered calls U.S. High Yield tactically bullish, UBP maintains selective exposure for extra carry.

In Europe, the picture has cautiously improved: Schroders saw technical conditions ease after a quiet summer for issuance, Allianz Global Investors and Wells Fargo both call the category resilient. A quality argument often missing from the debate: the share of BB-rated bonds in the global HY index rose from 39% in 2007 to 62% now, CCC fell from 15% to 7%. Today’s asset class carries structurally less risk than it did fifteen years ago.

Bear case: 21 of the 58, 36.2%, are underweight. Amova AM, Wellington, TD Asset Management and Fidelity all say spreads are too tight for further compression. BlackRock took a new step this quarter: a structural underweight in High Yield, favoring equities and private infrastructure equity instead.

Regionally, the picture is sharper still. Candriam is negative on U.S. High Yield, UniCredit runs an explicit underweight. DWS downgraded European High Yield over geopolitical risk tied to the Gulf conflict, HSBC holds a similar negative bias. Voya and MFS both say the extra compensation for the extra risk is simply too small to be worth it.

Source: Alpha Research

Yet the consensus sits uneasily next to the numbers. High Yield ranks last, but has been the best-performing fixed income category of the five this year: +0.77% in August, +1.88% year to date, the highest reading on both counts. Government bonds, the category meant to provide protection, lost the most: -1.82% YTD. Consensus looks forward to a compensation problem, performance looks back on a year in which that problem hasn’t yet shown up.

The hinge

Northern Trust is the most striking dissenting voice in this story: eleven-time laureate at the Asset Allocation Awards over eleven years, across the Asset Allocation, Regional Allocation and Overall categories. The panel data places the manager explicitly overweight High Yield as of August 2, while its broader bond book sits underweight at the same moment: Bonds overall, Corporate Bonds and Inflation Linked Bonds all at -1. That isn’t an inconsistency. It’s the exact split from this article’s opening, in practice: Northern Trust wants no duration, but does want credit risk.

Historically, the current positioning isn’t unusual. In 30 of the past 166 months, 18% of the time, High Yield has already been the least attractive fixed income category. CIOs have occasionally been more negative in number, but not structurally. So the question isn’t whether this is unprecedented. It’s what would need to change. The hinge is the fourth-quarter issuance calendar: if it stays slow, the technical support holds. If the refinancing wave arrives sooner than expected, compensation shifts faster than the ranking does.

The insurance policy that no longer pays out returns on its own once its price changes. Right now the reverse holds: government bonds offer less protection than before, and credit has to earn its own protection, at a compensation that simply isn’t there at this level. That High Yield happened to deliver the best return this year changes nothing: spreads price what’s still to come, not what already happened. Spreads will speak again once that changes. Until then, High Yield is mostly expensive: the same risk is cheaper to find elsewhere.

New to this? Credit spreads are the price investors demand for carrying credit risk on top of safe government bonds, and that price is now historically low for High Yield. For your portfolio, that means the same level of risk is currently cheaper to find in equities than in high-yield corporate bonds.

As September opens, two Awards panel reports set up a clean test of conviction against consensus. The Asset Allocation Consensus, built each month on sixty-nine institutional managers overseeing sixty-two trillion, five hundred and fifty-one billion euro in total, rates High Yield among its least favoured fixed income categories. Northern Trust Asset Management disagrees, holds a two percentage-point overweight, and grounds that call in a specific supply argument. Pictet Asset Management, meanwhile, retreats from Utilities.

House View: Northern Trust Asset Management

Northern Trust Asset Management, nominee for this year’s Asset Allocation Award and the most decorated firm in the Awards’ history with eleven wins in eleven years, holds a two percentage-point overweight in High Yield, four percent tactically against a two percent strategic weight, unchanged from its last reading. The conviction rests on a supply argument: after a nine-basis-point spread widening in July, primary issuance undershot expectations, and Ben McCubbin, Co-Head of High Yield, writes that “we expect issuance to remain slow this month, limiting net supply and potentially providing a short-term technical tailwind for the asset class.” The Consensus, by contrast, is markedly more cautious, a net underweight of twenty-four percent, ranking High Yield twenty-second of twenty-five categories.

Bond Yields: The Long and Short of It, September 2026↗

House View: Pictet Asset Management

Pictet Asset Management, nominee for the Sectors Award and an eleven-time finalist in that category, arguably the panel’s sector specialist, cuts Utilities from overweight to neutral this month. “The recent surge in bond yields and the possibility of rate hikes bode badly for utilities... We therefore downgrade utilities to neutral,” the house writes, arguing higher long-term yields erode the sector’s appeal as a bond proxy and dividend play. The move is a formal rating change, not a tactical trim, and it runs directly against the Consensus, which still ranks Utilities seventh of twenty-five categories with a net overweight of forty-three percent.

Barometer: Robust earnings growth to push equities higher, September 2026↗

What It Means for the Consensus

Two contrarian moves, opposite directions. Northern Trust holds a two-point overweight in High Yield, backed by a supply argument, where the Consensus is most negative, rank twenty-two of twenty-five. Pictet retreats from Utilities where the Consensus is most positive, rank seven of twenty-five. Neither is yet a signal.

No professional investor will say it out loud, but an AI bubble and a closed Strait of Hormuz are now pulling almost equal weight on the market. Yet that is exactly what this month’s numbers show. Measured by breadth and portfolio action among the 39 managers scanned for this report, the AI capex cycle and the Strait of Hormuz conflict score a mathematical tie. Only on the number of managers touched by the theme does AI capex narrowly beat Hormuz, making it this month’s lead theme.

Even so, the 69 reports read this cycle leave little doubt about how asset allocation is being positioned. Despite the tension between growth optimism and geopolitical risk, it remains decisively risk-on.

Asset allocation is the decision that makes the biggest difference to a portfolio’s eventual return, more than security selection or timing within a category. This report therefore sets out not only what the consensus among asset managers is, but why: through the eight macro themes driving positioning this month among the 39 managers scanned for the underlying research.

The signal

The table accompanying this article covers all 25 categories tracked by the AAC (Asset Allocation Consensus), the key moves follow below. Equities stand at 74.1% overweight versus 1.9% underweight. Of all 166 months since this survey began, only 27 were more optimistic. Cash shows the mirror image: 61.1% underweight versus 11.1% overweight, the gloomiest reading ever recorded for the category. Real estate and the broader bond category remain mildly unattractive, and commodities hold a moderate overweight, though less pronounced than last month.

Within regions, the preference for emerging markets is outright historic this time: 64.6% overweight versus 3.1% underweight, the highest reading ever recorded. America also remains firmly overweight, despite all the talk of an AI bubble, holding exactly the same tilt score as last month. Japan sits at 31.7% overweight, just over the line into overweight territory, a position resting mainly on the Japanese market’s sensitivity to oil imports and a structural AI tilt. Europe and Pacific ex Japan share the role of least-wanted region. Both tilt scores still fall just within the neutral zone, but they form the bottom of the ranking.

Within fixed income, emerging market debt is the standout, the strongest of the five categories at 52.7% overweight. Only 30 of the 166 months measured scored higher. High yield sits at the other end of the spectrum and, since government bonds moved to neutral this month, is now the only category still classified as underweight. For high yield, only 25 months were ever gloomier, a reading that puts the category close to a multi-year low.

Technology remains the most overweight sector: 78.6% overweight, and the only sector at 0% underweight. Industrials trails as the second-strongest sector, at 50.0% overweight, with a tilt score that has climbed steadily this year. Financials holds a stable overweight. Consumer staples is technology’s mirror image, structurally the least-wanted sector on the board. Utilities, healthcare and consumer discretionary are this month’s sectors in motion. More on that below.

AI capex: the lead theme, with a vocal minority against it

The AI capex cycle is not only the most broadly held theme this month, it is also the theme with the most direct portfolio action: 34 of the 35 managers who flag it also translate it into an actual position. Strong second-quarter results and repeatedly upgraded capex plans from the major hyperscalers are fueling confidence in what has become known as the ‘AI trade’. That translates into broad upgrades across technology, semiconductors and software, and into a structural preference for America, Japan and emerging markets. Precisely the regions sitting at the top of this month’s AAC figures.

At the same time, unease is building. Valuation and concentration risk are named by a substantial share of managers as the cycle’s biggest risk. There are concrete concerns about a correction in semiconductors and memory chips, and doubts about how quickly AI investment will pay for itself. A small but vocal minority goes further and holds a tactical underweight equity position, backed by negative free cash flow at one of the largest AI names and by a South Korean technology index trading 40% below its peak. The same minority warns that a wave of AI IPOs has historically been a late-cycle signal, not a sign of an early one.

That tension, a consensus sitting almost unanimously overweight against a small group doing the opposite, is what gives the theme its edge. Not the question of whether AI is driving the market, that much is settled. Rather, the question of how late it already is in that cycle.

The theme also reaches well beyond equities. Rising bond issuance by hyperscalers to fund those capex plans is compressing investment-grade spreads in that corner of the market, reinforcing the appeal of corporate bonds within an otherwise unattractive fixed income category. Real assets benefit too: energy, industrial metals and data-center infrastructure are explicitly cited as spillovers from the same capex wave, which helps explain why industrials has climbed steadily this year to the second-strongest sector position.

Hormuz: the risk that will not go away

The conflict between the United States and Iran flared up again in July, after a memorandum of understanding in late June brought only temporary relief. Transit through the Strait of Hormuz was disrupted once more, Brent climbed toward and above $100 a barrel, and the energy price shock fed renewed inflation fears and higher bond yields. Most managers now treat this as a recurring background risk rather than a one-off shock, and are responding to it concretely. Trimming equity and oil overweights. Higher demand for gold and the dollar as a hedge. Caution on government bonds and on European and Australian equities.

That explains much of why Europe and Pacific ex Japan, which includes Australia, are this month’s least-wanted regions in the AAC figures, while oil-poor, import-sensitive Japan benefits from any sign of de-escalation.

Not everyone shares the gloom. One party notes that the odds of the most disruptive scenarios have actually fallen, and that geopolitical risk is no longer the dominant market driver. A reading that stands out sharply against the broadly defensive tone of the rest of the field.

Central banks: hawkish, but the numbers say otherwise

Under new Fed chair Kevin Warsh, the market has flipped from expecting rate cuts to a hawkish ‘hold’, with heightened uncertainty as Warsh pulls back from explicit forward guidance. That pushed up the term premium and long-end yields: the 30-year US Treasury yield reached its highest level since 2007, the 10-year German Bund yield its highest since 2011. The ECB and the BOJ are also widely seen as tightening further, reinforcing caution on government bond duration and support for the dollar.

What stands out here: government bonds are actually moving from underweight to neutral this month, not further the other way. That is less contradictory than it looks. The category was already sitting so deep in the unwanted camp that even a hawkish repricing cannot push it lower. It is a sign of how low the bar already was, not of renewed enthusiasm for government paper. One manager goes against the grain entirely and holds a neutral, rather than defensive, duration position, arguing that the market is pricing in a rate hike as more likely than the manager itself believes.

Oil: the best-performing sector of the month, with a catch

The oil price rose sharply in July, from just above $70 to more than $100 a barrel at its peak, driven by renewed Iran tensions and disrupted transit through Hormuz. That made energy the best-performing sector of the month and pushed inflation and rate expectations higher still. At the same time, a substantial share of managers expect this price shock to be temporary, with a gradual normalization toward $75 to 90 a barrel later this year. Chinese strategic reserve drawdowns and alternative pipeline routes are cited as buffers.

ING Investment Office has already drawn a conclusion from this: lowering the weight of Europe, hit by both the oil price and a lack of its own growth drivers, while raising the weight of tech-sensitive Japan.

That expected normalization may also explain a figure that does not add up at first glance. Despite the month’s strongest sector performance, the Consensus Tilt on energy actually declined slightly, from a small plus to a small minus. If the price shock is expected to be temporary, there is no need to pull the sector weighting up with it. One party takes the relativizing view further still, noting that the feared second-round effects on core inflation have largely failed to materialize.

Four smaller themes that explain the rest of the board

Inflation remains stubbornly above central bank targets, driven mainly by the renewed rise in oil prices. That limits room for rate cuts and puts further pressure on the appeal of government bond duration. UBP breaks clearly from the consensus here: in the manager’s view, the peak in inflation is probably already behind us, with a gradual decline in the second half of the year if Middle East tensions ease on a sustained basis. Even UBP, though, does not see a return to the 2.0 to 2.5% target zone before spring 2027.

The dollar is fighting its own two-front battle.

In the near term, supported by safe-haven demand around Hormuz and by higher US rates. Over the medium term, a majority expects gradual weakening instead, driven by de-dollarization, with central banks rotating reserves away from the dollar and toward gold. That explains in part why emerging market debt is the strongest fixed income category this month: local-currency EM debt benefits from exactly that scenario, while hard-currency EM debt is approached more cautiously as long as the dollar stays strong in the near term.

China is widely seen as a two-track economy: weak consumption and an ongoing property crisis offset by strong exports in high-tech and green manufacturing. That export strength reduces the urgency for large-scale stimulus, so most managers stay neutral on China specifically while building the broader EM overweight mostly outside China. A nuance that makes this month’s record regional preference for emerging markets more precise than the headline figure alone suggests.

Trade tariffs remain the weakest of the eight themes, by far the least tied to direct portfolio action. In early August, the US government replaced its expiring universal tariffs with broader sectoral levies. Some see that as renewed escalation, others as a shock that is largely behind us. Few managers attach their own position to it.

What actually changes this month

Of the 25 categories the AAC tracks, only four change classification this time. Government bonds move from underweight to neutral, as described above. Within sectors, utilities steps from neutral to overweight, the month’s strongest improvement and the sector’s highest reading in nearly its entire measurement history. Healthcare moves the other way, from overweight to neutral, after its biggest decline of the year. Consumer discretionary slips from neutral to underweight.

None of the eight macro themes explicitly explains why utilities and consumer discretionary are moving now. That remains an open question for now, though for utilities a link to the power hunger of AI data centers seems plausible, given the same cycle already lifting industrials. Consumer discretionary keeps sliding while consumer staples, the structurally least-wanted sector, has actually improved slightly this year, which at minimum suggests that consumer caution is becoming more selective: not away from the consumer, but away from discretionary spending.

At the asset class level and the regional level, nothing changes. America, Europe, Japan and emerging markets hold exactly the same tilt score as last month. This cycle’s movement sits entirely in fixed income and sectors, not in the big strategic calls. That distinction is itself informative: the broad shape of asset allocation holds, the professional investor is currently adjusting at the edges, not the foundation.

What could turn this picture around? The Strait of Hormuz itself is the candidate most likely to move things fastest: an actual reopening could flip the oil price, inflation fears and the regional stance against Europe in a single move.

The margin between AI capex and Hormuz was razor-thin, and that is exactly what makes the takeaway for the professional investor razor-sharp: the scale still tips toward risk-on this month, just less convincingly than the equity positioning suggests. It is not whether that balance eventually tips that should occupy the market. It is when, and who moves first.

New to this?

Every month, 69 reports from professional asset managers are distilled into one clear signal about where money is flowing and why. This month that signal is extreme: confidence in equities and technology has never been higher, and confidence in cash never lower, and that is worth knowing before you look at your own portfolio.

For fifty years, the bond was the foundation under every portfolio. Shake the equity market, and the foundation absorbed the blow, full stop. But what if that foundation gives way itself? That’s the question creeping through Ray Dalio’s last five LinkedIn posts, though never quite in so many words.

Over the past few months he published pieces that seemed to have little in common: macro investing, AI, diversification, China, US debt. Five loose observations, you’d think. Lay them side by side and something else emerges: a strikingly consistent asset allocation argument.

What draws us in is the premise Dalio opens with, one that also sits at the core of our own research: “The most important decision you have to make is what asset allocation you have.” One thread through five pieces. And inevitably, the question that follows: what does that mean in practice, now that both equities and bonds carry structural risk?

In the piece from June 4, Dalio lays the groundwork, and his reasoning is compact. Macro forces drive the relative moves between asset classes, and those relative moves account for most of a portfolio’s return. Not stock picking. Not timing within an asset class. The allocation itself.

That’s why he argues for a global macro long-short approach: understand the macro drivers, and you understand which asset classes will win and lose against each other. Asset allocation, in his view, isn’t one of the decisions an investor makes. It’s the decision.

Nothing new in itself, Dalio is repeating something from his own philosophy he’s preached for decades. It gets interesting with the four pieces that follow.

The Problem Has Changed

In the two pieces from June 10 and June 15, Dalio brings principled thinking, AI and portfolio construction together. His concern: heavy concentration in AI-related stocks, high valuations, and real uncertainty about how the two relate.

Not trying to predict the winner, that’s his answer. Diversification across as many uncorrelated return streams as possible, the premise behind what he calls his “Holy Grail.” Strategic asset allocation is the base, tactical allocation he reserves for moments with sufficient conviction.

Then comes the number the rest of this article turns on. Dalio expects real equity returns of roughly minus 5 to minus 10 percent over the next five to ten years. No correction, no dip, a structurally poor decade for equities in real terms.

This is where our own data get interesting.

Our Numbers Next to His

Dalio is considerably more bearish than the institutional consensus. Our Expected Returns database collects Capital Market Assumptions from 45 to 69 reports per asset class, depending on the region, and shows what professional investors actually expect right now.

One caveat first, or you’re comparing apples to oranges: Dalio’s figure is real, adjusted for inflation. The consensus figures below are nominal. That difference accounts for most of the gap between the two views.

Even after that adjustment, a gap remains. At a typical inflation assumption of around 2.5 percent, consensus on US equities would land at a real return of roughly 3.5 to 4 percent, well above Dalio’s entire range.

And gold? The consensus isn’t exuberant there either: 5.80 percent, lower than Global Equities and Emerging Markets. Dalio still wants 10 to 15 percent of the portfolio in it. That’s not a return bet. It’s an insurance premium against currency debasement and debt monetization, one the consensus simply doesn’t price in.

Geography, Debt and Gold

The piece on the tribute system dynamic adds a geopolitical layer. The balance of power between the US and China is shifting, Taiwan is the pivot because it dominates global AI chip production, and that dependency makes AI concentration more fragile than a purely financial analysis suggests.

Geographic diversification, then, is no longer just about dampening volatility. It becomes protection against geopolitical regime change, as Dalio puts it.

Look at our regional Consensus, and tension appears. Professional asset allocators are overweight the US, overweight Emerging Markets, overweight Japan, neutral Europe and Pacific ex Japan. No broad flight from US equities, none at all.

That doesn’t make Dalio wrong. His argument is structural, five to ten years out. The Consensus is tactical, three to twelve months out. Both can hold at once.

The last and heaviest piece, from August 21, shifts the problem from equities to bonds. Government bonds are traditionally the diversifier once equity risk rises. Dalio’s point cuts deeper: what if the government debt itself becomes the source of systemic risk?

His mechanism is a chain. Budget deficits of roughly $2 trillion a year. Rising interest costs of around $1 trillion. Roughly $10 trillion in debt that needs refinancing, and not enough demand to absorb it on current terms. The result: higher rates, monetization, or both, and eventually currency debasement.

He’s not just gloomy, he has a fix ready too. His “3% 3-part solution” aims to bring the US deficit down from roughly 7 to 3 percent of GDP, through a mix of spending cuts, higher tax revenue and lower rates. Without that correction, he calls the current path unsustainable.

The timing stays pointedly uncertain, three years, give or take two. His positioning is not: underweight government debt, 10 to 15 percent gold, a small slice of Bitcoin, more geographic spread.

So what do the people who work with this every day actually think?

What Allocators Are Actually Doing

Our Asset Allocation Consensus follows Dalio here, partly. Bonds sit fourth, underweight, but one spot higher than last round, when Cash was still the less unpopular option. Cash has since dropped to last place, also underweight.

A shift that runs against the flight-to-safety instinct: if investors were truly worried about rate and bond risk, cash would rise instead. Precisely the opposite is happening.

Within fixed income the distinction sharpens. Government Bonds are underweight, just as Dalio argues, and are in fact the second-least favored category. But Emerging Market Debt is overweight, Inflation Linked Bonds and Corporate Bonds sit neutral. “Bonds” isn’t one block for the Consensus. It’s a collection of categories, each with its own risk profile.

Commodities, meanwhile, rank second of all asset classes, overweight, right behind Equities. Not a gold position, Commodities is broader, but the same intuition driving Dalio: real assets are getting more weight than a year ago.

The Consensus doesn’t follow Dalio blindly. Nor is it heading the same direction by accident. Selective, with more nuance within fixed income than his “underweight debt assets” line suggests.

Three questions, and they decide what you do with this.

Is Dalio right that diversification matters more now? Probably. Concentration in a handful of AI names, combined with high valuations, is a risk that’s stayed underappreciated in recent years. But real diversification is more than adding extra equity regions, it’s about return streams that are genuinely uncorrelated.

Are bonds losing their diversification function, as he claims? Here we’d be more nuanced. Painting all bonds with one brush goes too far, our own Consensus shows it: duration, credit risk, inflation sensitivity and currency make a huge difference within fixed income.

And 10 to 15 percent gold, does that make sense? A sizeable position, larger than most institutional portfolios hold. But the Consensus itself expects no high return on gold, we saw it already, 5.80 percent, less than equities. Dalio isn’t buying return here. He’s buying insurance. We keep Bitcoin deliberately small too, just like he does.

The classic question for an asset allocator used to be: how much equity risk can I diversify away with bonds? Dalio’s recent pieces suggest a different one: what actually diversifies a portfolio anymore, now that equity concentration, government debt, currency risk and geopolitics are growing more tightly linked?

The foundation that sat under every portfolio for fifty years isn’t collapsing. It’s subsiding. Dalio’s five posts aren’t a wrecking ball, more a soil survey: a signal of where to re-lay the foundation, not where to run. Whoever rebuilds now on numbers rather than conclusions will be standing steadier in five years than whoever waited for the cracks to show.

New to this? Ray Dalio’s LinkedIn series touches on a question bigger than his own portfolio: what still protects your money when equities, bonds and currencies are all under pressure at once? That’s exactly the question professional asset allocation tries to answer every month.

This interview took place as a live conversation on July 1, 2026. What follows is a written synthesis.

Steve Chiavarone doesn’t open a conversation about tactical asset allocation with the latest data print or the next rate meeting. He opens with a question most of the 72 asset managers in the Asset Allocation Consensus skip: what long-term regime are we actually in?

“We ask two longer-term questions before we ever analyze what’s happening in the market over a short period of time. The first one is: what secular regime are we in? And the second is: what is the right framework with which to think about this environment? Then we look at the specifics, and we ask: what’s different from the framework?”

Steve Chiavarone, Deputy CIO Equities, Federated Hermes

That ordering is not incidental. Where many asset managers start from the short-term signal and reason forward from there, Federated Hermes sets out the regime first and only then tests the present against it. It’s a framework, not a forecast, and that distinction explains much of why the firm was both nominated for the Asset Allocation Award and won the Fixed Income Award this year.

Secular bull, secular bear

The framework itself is simple to sketch, but its edges are sharp. Equity markets, in Chiavarone’s view, move up or sideways over long stretches, never structurally down: a diversified market doesn’t set lower lows over a ten-year horizon. A secular bear, then, isn’t necessarily a large decline but the inability to make new all-time highs. The 1999–2013 period is the textbook case: two 50% drawdowns, but the real pain was thirteen years of no return for anyone who had bought at the top.

“You’ll sit and you’ll be 5, 7, 10, 13, 20 years out and have made no money in the market if you had bought at the old peak. And that’s really where you create the skepticism that then allows you to build the case for bull.”

Steve Chiavarone, Federated Hermes

A secular bull, Chiavarone argues, needs two ingredients: upward pressure on earnings through technology, and upward pressure on multiples through demographics. The current bull, born in 2013, is fed by AI, cloud and robotics, a trend Federated Hermes flagged as early as 2015, and by millennials as the largest generation ever, who start investing later and therefore need higher returns. As long as that framework holds, the team buys dips rather than sells rallies. The standard equity overweight sits between 4 and 6%, and the team is comfortable in the upper half of that range.

The approach was tested during COVID. Federated Hermes asked itself two questions: does the pandemic accelerate the technological revolution, or disrupt it? And does it accelerate the millennial demographic trend? The answer to both was yes, cloud adoption and remote work took off, and the housing market and wealth accumulation of younger investors accelerated. On that basis, the team expected a decline of no more than 30 to 35%. It came in at exactly 34%, followed by the recovery to new all-time highs the team had anticipated.

One detail from that same period shows how hard it is to keep a framework like this uncontaminated: team members based in New York turned out to hold a noticeably gloomier view of the economy than colleagues elsewhere in the country. A reminder that even seasoned strategists aren’t immune to the bias local experience can introduce into macro decision-making.

One decision, told twice

The underweight in EM debt and high yield is not a credit call, Chiavarone stresses, it isn’t about default risk or a macro disaster scenario. It’s a spread argument: too little compensation for how far out the risk curve you have to go. And once you conclude that compensation isn’t there, the risk budget has to go somewhere else.

Federated Hermes chooses to put that budget into equities, not as a separate decision, but as the second half of the same underlying call.

“Whether it’s EM debt or high yield, you’re going quite a ways out the risk curve within fixed income and there’s just not as much spread available. So what we’ve chosen is: rather than go out to the riskiest parts of the fixed income spectrum, you’re better off going into equities.”

Steve Chiavarone, Federated Hermes

That is arguably the most distinctive substantive observation from the conversation: the underweight in emerging-market debt and the overweight in equities read as two separate lines in a report, but in the decision-making they are one and the same judgment about where risk gets paid best. One nuance: Federated Hermes carries structural overweights in EM bonds in specific funds within the multi-asset suite, which also limits how far the tactical underweight can go in practice.

On the rates side, a third element enters the picture. The committee recently shortened duration, implying an expectation of higher long rates and lower bond prices. The reasoning: the market overestimates the odds of further rate hikes. Chiavarone instead expects a twist steepener, short rates falling once the market realizes hikes aren’t coming, and long rates rising because the United States, in his view, is the next major investment hub.

“We think that short rates will actually come down as the market realizes that hikes are not forthcoming. Meanwhile, the center of the United States right now is the next hot emerging market, that’s where the data center activity is, that’s where the investment is happening. So long rates will go up. A healthy 10-year bond yield in the United States is closer to 5%.”

Steve Chiavarone, Federated Hermes

With that metaphor he places the US rates market in the same mental framework as the EM debt position: capital seeks out wherever growth and return meet, whether that’s an emerging market or the American data-center boom. A 10-year yield closer to 5%, alongside structural inflation of 2.5 to 3%, is in this reading not a risk but a confirmation of the scenario.

Twenty years of trust as a decision-making edge

Behind the substantive calls sits a decision-making structure that makes the framework operational: a three-tier committee system covering liquidity, fixed income and equities, topped by a Macro PRISM Committee that sets the official house view every six weeks, in step with the Fed cycle. In cases of persistent disagreement or acute situations, a team member can “ask for the ball”, claiming the decision on conviction. During COVID, it was Chiavarone who asked for the ball and convinced CIO Stephen Auth to go along with the bull case. In 2023 the roles were reversed exactly: recession fear was at that point close to 100% consensus among Bloomberg strategists, and it was Auth who asked Chiavarone to fall in line with the non-recession view. Chiavarone did, and it turned out to be the right call. For Chiavarone, that back-and-forth is the proof the system works: it isn’t seniority that claims the ball, but whoever holds the strongest conviction at that moment.

“Anyone who really feels as though they have high conviction, who asks for the ball, we have a tendency to go that way, because we’ve worked together for 20 years. We know each other’s tendencies. My bias has historically been towards inaction. The CIO’s bias is towards action. And so we know that about each other.”

Steve Chiavarone, Federated Hermes

That acknowledgment of a personal bias, and of a colleague’s complementary bias, is rare in institutional communication, and relevant precisely because of that. It makes the process more credible than the committee structure alone would: not the existence of committees, but the knowledge of each other’s tendencies determines how quickly and how well a team turns conviction into action.

What this means for the portfolio

For pension funds weighing Federated Hermes’s positions against their own consensus figures, the core message is that the three most notable deviations, the equity overweight, the underweight in EM debt and high yield, and the short-duration position with a twist-steepener view, are not three separate calls. They are the outcome of one shared scenario: no imminent rate hikes, no recession, a secular bull that remains intact, but insufficient compensation for credit risk in the riskier corners of the bond market. Whoever decouples one of the three positions from the other two, in Chiavarone’s view, misses the actual reasoning.

Federated Hermes was nominated for the Asset Allocation Award and won the Fixed Income Award at the 11th edition of the Asset Allocation Awards by Alpha Research.

Equities convince, the yen tests, the bond market decides.

Japanese government bonds are rarely the first thing a portfolio manager mentions when he’s excited about Japan. This week, after the first US yen-buying intervention since 1998, they were.

A Historic Intervention

Japan and the US Treasury intervened jointly in the currency market this week: the first US yen-buying intervention since 1998. The yen recovered from roughly ¥164 to ¥155 against the dollar, before giving back part of the gain. Reuters calls the recovery tentative and warns that intervention mainly limits the speed of the decline, not the underlying direction. A durable trend break, Reuters notes, would likely require a stronger BOJ response, lower US rate expectations, and/or lower oil prices. (Reuters)

A Consensus That Was Already There

Our latest Asset Allocation Consensus data show that professional investors were already overweight Japanese equities before the intervention: 31.7% overweight, 58.3% neutral, and 10.0% underweight, with a tilt of +0.217. At +0.217, Japan just clears our +0.20 threshold for an overweight recommendation. Our data’s formal recommendation is overweight, with more than three times as many managers overweight as underweight.

The intervention did not create this investment case. It tested it.

The arguments underlying the panel are consistent: rising earnings expectations, positive price momentum, corporate governance reform, better capital discipline, and a more shareholder-friendly corporate culture.

Russell Clark reaches a similar conclusion from a different angle. He now calls Japan a “more normal” country, with inflation instead of structural deflation, and argues that normalization is precisely what benefits equities. (Russell Clark)

The Yen Is Still the Test

Where the equity consensus is stable, the yen is not. Alyosha, who tracks the yen most closely, saw a technical basis for a rally even before the intervention, but expected it to come through monetary policy, not direct intervention. The intervention caught him off guard. Days later, he was already calling the yen a disappointment again. (Alyosha, Punch Lines; Alyosha, Evening Wrap)

Capital Flows Research makes a sharper point: Bessent talks, Tokyo intervenes, but the underlying policy mechanics haven’t changed. The yen carry trade therefore remains tied to global liquidity and risk positioning, including the AI trade. (Capital Flows Research)

Russell Clark is even more explicit: he is neutral on the yen. His position follows not from currency direction, but from what the rates market is doing.

Investors, in other words, can be bullish on Japan without being bullish on the yen.

The Bond Market as Counter-Signal

Our Expected Returns data show a notable move: the expected return on Japanese government bonds rose to 2.46% in yen, an increase of roughly 46 basis points and the largest positive revision in the dataset this cycle. Methodologically, higher yields mechanically improve long-term expected returns. That reflects future return potential, not necessarily near-term price performance.

The 10-year JGB yield stands at its highest level since 1996, and the 30-year yield broke above 4%. (Michael Green) Russell Clark draws a hard conclusion from this: bearish on Japanese government bonds, because the market is now pricing in inflation rather than deflation.

This is where the real cross-asset signal sits. Japan is the sender: Japanese life insurers, historically large buyers of foreign bonds, can pull capital back to a home market that finally yields again. The global bond market is the receiver. Japan holds roughly $1.1 trillion in US Treasuries. When that buying flow slows, a structural marginal buyer disappears from US, European, and UK long-duration markets.

Japan, No Longer Isolated

A higher Japanese yield curve therefore feeds through into US Treasuries, European government bonds, and UK gilts, via reduced Japanese demand for foreign duration. The intervention itself underscores that channel: Russell Clark estimates that Japan may have sold $50-100 billion in US Treasuries to support the yen. (Russell Clark)

Alyosha links the yen and long US Treasuries as a possible shared short-side problem. That remains a hypothesis, not a confirmed dual intervention objective: Alyosha does not claim this was the official design.

Position Implication

If Japan’s rate normalization continues, expect sustained pressure on JGB prices and a gradual pullback of Japanese capital from foreign duration. If the intervention holds without further BOJ action, the yen remains exposed to renewed carry trade pressure. The hinge point is the next BOJ meeting and the direction of US rate expectations.

The intervention bought time in the currency market, not a solution. That solution, as the opening already suggested, sits in the bond market: while the yen reacts, the rate rules. For the professional investor, that’s the real lesson of the week: Japanese equities convince, the yen tests, and the bond market decides.

New to this? The US joined Japan in buying yen this week, marking the first US yen-support intervention since 1998. The bigger story is playing out in Japanese government bonds, where rising yields could pull capital home and away from the US, European and UK bonds many global portfolios depend on.

Sixty-six recommendation changes this month, against 54 in July, and yet the consensus barely moves. 51.5% of the changes were positive, 48.5% negative, almost identical to last month’s split.

Our database counted 69 reports current enough to qualify this cycle, 53 of them brand new. Most of the movement isn't visible in the headline recommendations. It happens beneath the surface. Regional allocation stands out the most: from 14 changes in July to 25 this month, and that shift, as it turns out, runs in the same direction as the rest of this cycle.

That balance isn’t a product of calm. ince late February, the world's most important oil shipping route, the Strait of Hormuz, has been largely shut following the US-Israeli air war with Iran.. In early August both countries signed a memorandum to reopen the passage, after which Brent fell nearly 5% in a single day, having gained almost 24% in July.

US inflation eased to 3.5% in June, while the eurozone climbed to 2.9% in July, both still much closer to 3% than to central banks' 2% inflation target. Yet the consensus isn’t heading for shelter: equities and commodities keep their preference, while cash keeps losing ground. Risk-on remains the dominant positioning, even with the gateway for a fifth of the world’s oil trade still hanging ajar.

The four charts below show exactly where that consensus stands this month, each measured against its full history since 2012. White candle: the score rose in 2026. Black candle: it fell. The wick marks the highest and lowest score ever recorded for that category since 2012.

Asset Allocation

None of the headline categories change their consensus recommendation. Underneath, plenty shifts, especially in bonds and cash.

Bonds climb from fifth place to fourth. Within the category, recommendations move from Underweight and Neutral toward Overweight, pushing the consensus score materially up from -0.417 to -0.237. Bonds remain underweight, but the tone turns noticeably less negative.

Cash becomes the least attractive asset class, dropping to the 98.8th percentile of all observations since 2012, only 1 to 2% of the past fourteen years scored more negative.

Commodities remain the second-favorite asset class after equities. Overweight and Neutral both decline, Underweight increases, but the consensus stays positive. Of the 165 months measured, only about 30 scored higher, commodities remain historically very strongly valued.

Regional Allocation

Only one consensus recommendation changes here: Pacific ex Japan drops from Overweight to Neutral. The underlying movements are more interesting than that single change.

Emerging Markets remain the favorite equity region and keep their Overweight rating. Both Overweight and Underweight decline, while Neutral increases, strategists are drifting slightly toward the middle without abandoning their preference.

US equities move the opposite way: Underweight and Neutral shift toward Overweight, pushing the consensus score higher still. The gap with Emerging Markets narrows, but the ranking holds: Emerging Markets first, the United States second.

Both regions remain in the historical top tier: of roughly 165 months measured, only about 10 to 11 scored higher each time. Neither EM nor the US has often been priced this convincingly. Here too, caution isn’t winning out, risk appetite is, in line with the broader picture this month.

Fixed Income

Emerging Market Debt remains the favorite fixed income category. As with EM equities, both Overweight and Underweight decline in favor of Neutral. The recommendation doesn’t change, but conviction softens slightly. Historically, EM Debt remains by far the most strongly valued category within fixed income.

Government Bonds climb from fifth to fourth place: many Underweight recommendations move to Neutral, and part of the Overweight positions shift the same way. Government Bonds remain underweight, but are no longer the least attractive fixed income category.

That distinction now belongs to High Yield, which has slipped into the historically least attractive fixed income categories.

Sectors

Most of this cycle’s consensus changes happen here: three recommendations flip at once.

Financials makes the biggest jump. Almost every shift runs from Underweight to Overweight, giving the sector not only an Overweight rating but also a climb from sixth to third place in the ranking.

Utilities move the opposite way: nearly every shift runs from Overweight to Neutral, with a small portion heading to Underweight. Notably, the sector still ranks among the historically best-valued, this month’s downgrade stands in sharp contrast with the long-term picture.

Consumer Discretionary follows the same path from Overweight to Neutral, sliding close to the bottom of its own historical range.

Consumer Staples becomes the least attractive sector of the ten: Overweight and Neutral both decline, Underweight increases, and the sector drops from ninth to tenth place.

Not every move points the same way. While bonds and Financials gain conviction, Underweight calls also grow for commodities, and High Yield keeps losing ground. Part of the reports still holds a more defensive reading, even if that view is in the minority this time.

The clearest pivot to watch for the next cycle: whether Financials’ climb to Overweight holds, or whether the fragile shift toward Underweight in Utilities continues. On the macro side, the Hormuz memorandum is still fresh and fragile, a slide back into an actual closure would be the first real test for this month’s risk-on consensus.

Sixty-six recommendation changes would normally suggest uncertainty. This month they suggest the opposite. Beneath the individual revisions lies a remarkably stable message: professional investors continue to prefer taking risk over hiding in cash. The headlines changed. The conviction didn't.

New to this?

Despite a largely closed Strait of Hormuz, wild swings in the oil price, and inflation running closer to 3% than to 2%, professional investors are still choosing equities and commodities over cash this month, what’s known as “risk-on.” For private investors, that means the average professional still prefers owning risk assets rather than sitting on cash, despite a macro backdrop that would seem to justify the opposite.

Three of the thirteen finalists of the 2026 Asset Allocation Awards published their views in last week, and the debate isn’t about whether technology is carrying the market, but how much longer you should pay up for it. Candriam and Invesco are both reshuffling their sector positions, while LGIM weighs which force lasts longer: the artificial intelligence (AI) revolution or geopolitical disorder. In the background, the global debt counter keeps ticking.

Candriam
Candriam, nominated for the Fixed Income and Sectors Awards, takes profits off US technology: the sector moves from +1 to neutral after the strong rally since May. “This is a tactical change, not a structural call” (Candriam, Monthly Coffee Break Equities, July 2026), the strategic view on semiconductors stays positive. The equity overweight runs through Japan and emerging markets, not the US. That gap between tactics and conviction is what the earnings season will test.
Monthly Coffee Break Asset Allocation, July 2026↗ · Monthly Coffee Break Equities, July 2026↗

Invesco
Invesco, winner of the Sectors Award, publishes its annual debt review: the global debt-to-GDP ratio rose in 2025 to 239.5%, driven mainly by emerging economies. “We assume that more debt brings more risk” (Invesco, Uncommon truths: Global Debt Review 2026). The risk lies in private debt service ratios, climbing wherever rates rose, France leads. Not panic, but the quiet condition under every scenario.
Uncommon truths: Global Debt Review 2026, July 2026↗

L&G Investment Management
L&G Investment Management, nominated for the Equities Award, takes a clear side in the AI-versus-geopolitics debate: “we believe AI will prove the more powerful and longer-lasting force” (L&G, Midyear global outlook 2026). Bond markets feel this first: the AI issuance wave, compared to the 19th century railways boom, is reshaping investment-grade credit indices. AI-watchers should be watching credit too.
Midyear global outlook 2026: AI vs geopolitics, July 2026↗

What It Means for the Consensus
The Asset Allocation Consensus has Information Technology on top with 71% overweight. Candriam (down from +1) and Invesco (up from underweight) are converging on neutral from opposite directions, an early signal. Candriam’s long core-European duration also runs contrary to the underweight government-bond consensus; LGIM offers no explicit equity rating.

Editor’s Note
House Views tracks how the winners and nominees of the Asset Allocation Awards, organised by Alpha Research, think and position. Not to predict markets, but to understand how investment views evolve before the consensus catches up.

A technology allocation is a matryoshka doll. The investor thinks he is buying one doll, but whoever opens it finds a second one inside: America. And inside that, a third: the dollar.

Technology is the most loved sector among asset allocators. Of the five finalists for the Asset Allocation Award for Equity Sectors, four are overweight. The only one staying neutral is, of all houses, the winner. That deserves an explanation, but first the question that precedes it: what exactly is inside that doll?

One sector, two hidden positions

The answer is in the holdings. The top 10 of the MSCI World Technology index accounts for 66.53% of the weight; for the Nasdaq 100 it is 44.71%. More striking: the two lists differ by just two names. That is more remarkable than it seems, because the Nasdaq 100 is not formally a technology index. It selects the hundred largest non-financial companies listed on the Nasdaq exchange, regardless of sector; Amazon and Alphabet officially fall outside technology. That a global sector index and an American exchange index nearly converge at the top says everything about how dominant the concentration is.

The regional breakdown makes it explicit. MSCI World Technology invests 89.47% in the United States, against 63.63% for the broad MSCI World. Overweight the sector, and you automatically increase your America weight. And for the non-US investor there is a third layer: an unhedged dollar position.

Here the sector allocation sends a signal that the regional and currency allocation must receive. Three decisions that most investment processes take separately turn out, in practice, to be one and the same position. The sector table hides a regional bet and a currency bet.

The consensus and its arguments

The consensus tilt for Technology stands at 0.67, the highest of all sectors in our universe. That tilt is based on the 68 asset manager house views we read this month. Among the five Award finalists, the tilt is even higher at 0.8. The specialists, in other words, are more positive than the broad field. Both figures are our own tallies; the finalist group counts five houses, which makes the second figure a qualitative signal, not a statistic.

The bull case rests on earnings, not on hope. Pictet AM reports that 99% of IT companies in the S&P 500 beat earnings expectations. UBP sees the sector’s 2026 earnings growth expectations more than doubling, from 31% to roughly 70%, and concludes that earnings are growing faster than share prices. Candriam points out that the forward price-to-earnings ratio of semiconductors is still in line with its five-year average.

The bear case, strikingly, uses the same sources. UBP notes that the SOX index trades at 28 times forward earnings, against a ten-year average of 19. ING Investment Office warns that elevated expectations leave no room for disappointments. Candriam took tactical profits in emerging markets because momentum has become crowded as a style factor. Four houses see the same risks; they just do not let those risks determine their allocation.

The dissenter is the winner

Invesco does. The Award winner is the only finalist neutral on technology, and the reason is not a sector view but a framework. In their scoring model, valuation carries three times the weight of any other factor. The US market trades at a cyclically adjusted price-to-earnings ratio of 47, just below the March 2000 peak of 49. When the US began its outperformance in 2008, that same measure stood at 25.

Then there is the AI question. In Uncommon Truths, Invesco‘s strategist asks whether AI is actually delivering for its users: the evidence for the makers of the infrastructure is there, but the evidence of durable productivity and margin gains for users is missing. As long as it is, the model does not justify the premium.

That doubt hits the sector investor more directly than it appears. Look at the top 10 again: NVIDIA, Broadcom, Micron, AMD, ASML, Intel, Applied Materials, Lam Research, eight of the ten names form the AI infrastructure chain. Invest in AI through the sector, and you buy almost exclusively the supply side of the theme. The platforms that apply and monetise AI fall outside the sector definition, and the purest AI companies are not even listed yet. A technology allocation is therefore not an AI bet, but a bet on the picks and shovels, precisely the side where Invesco questions whether the profits will stick. Within their US portfolio, technology is in fact a favoured sector; the neutrality sits at index level, not in conviction.

The consistency runs deeper. Invesco expects dollar weakness, and whoever follows the arithmetic above sees why that matters: a tech overweight is a dollar position. The winner does not dissent because a strategist holds an opinion, but because three separate model outcomes point the same way. Process over signal.

The position implication

If earnings growth continues: the consensus wins, and the hidden US and dollar exposure is rewarded rather than punished. If the AI gains for users fail to materialise: the Invesco framework wins, and the sector correction hits three positions at once. The hinge is not chip demand, but the first hard evidence of productivity gains outside the technology sector itself.

And so the circle closes: buy technology and you buy America, and buy America and you buy dollars. The matryoshka stands reassembled on the shelf, three dolls that look like one position. The consensus weighs the outer doll and finds it attractive; the winner takes them apart and weighs all three. Read the sector table as one decision, and you undercount your positions. Buying three dolls means weighing three times.

New to this? Buying the technology sector sounds like one decision, but it quietly ships with two more: a bet on America and, for non-US investors, a bet on the dollar. Knowing that changes how much technology you actually own.