Citrini believes AI revenue is still growing, but has shifted from being a source of upside surprises to a threshold for supporting massive capex. Meanwhile, the U.S. economy still appears to be expanding, while defensive assets have already strengthened.
The Nasdaq fell 5.3% in October, and US CCC-rated credit spreads widened to their highest level in four years; meanwhile, Treasuries rose and market sentiment indicators continued to signal risk appetite. Morgan Stanley maintains its overweight in global equities through the US and favors investment-grade credit.
Morgan Stanley maintains an overweight in global equities and an underweight in core fixed income, with US equities its preferred market. The bank believes AI investment supports earnings, but high oil prices, bond supply and funding pressures on lower-rated borrowers will increase volatility.
Major central banks have paused rate hikes, but JPMorgan expects tightening is not over. Financing-sensitive AI assets and lower-rated credit are under pressure. The bank remains positive on quality growth stocks and sees hedging value in developed-market government bonds when demand weakens.
Citi has reduced its equity and base metals allocations to neutral and remains underweight US and European investment-grade credit. In rates, it has added an overweight in UK government bonds while retaining an overweight in emerging-market government bonds.
Large US actively managed credit funds have generally underperformed their benchmarks over the past month. Goldman Sachs believes the economy can still support most issuers operating normally, but spreads remain tight by historical standards. It advocates select non-AI credit and prefers dollar to euro credit assets.
The U.S. cycle indicator is near a four-year high. Morgan Stanley maintains its preference for global equities over fixed income and for U.S. equities; historically, risk assets can still rise if the cycle turns defensive, but drawdowns deepen significantly in the market stress phase.
Global interest rate hikes and rising bond yields are weighing on the AI stock rally. BofA believes tech debt has become more attractive after its relative return fell to a 30-year low, while a new round of risk-asset allocation must wait for rate hikes to end and oil prices to fall.
South Korean valuations have fallen to their lowest since the financial crisis, while Asian technology stock valuations have halved. At the same time, earnings upgrade momentum in markets that previously led gains is near its peak. Bernstein favors growth stocks to participate in a potential rebound while retaining allocations to value and high-dividend stocks.
Goldman Sachs believes earnings growth and easing inflation can still support equities, but high valuations, technology stock concentration and interest-rate shocks make diversification more important. The bank is overweight equities and government bonds and underweight credit over the next 12 months.
The result of Brazil’s presidential runoff went against bets in prediction markets. Citi closed the Brazilian risk positions it had previously increased and removed its overweight in Brazilian equities from its global asset allocation; the bank believes crowded long positions ahead of the election could push asset prices below fair value.
Risk appetite fell to its lowest level since April 2025, with credit assets leading losses while government bonds cushioned the AI-related sell-off. Goldman maintains a moderately pro-risk allocation but believes near-term events could prolong volatility.
Rebounding energy prices and rising long-term interest rates are adding to growth pressures, but Goldman Sachs believes central banks will ultimately raise rates by less than markets have priced in. Earnings, positioning and valuations may still support equities at year-end. The bank maintains a modest tilt toward risk while using the yen and targeted energy exposure to address shocks.
Goldman Sachs’ risk appetite indicator has fallen to its lowest level since April 2025, but remains some way from historical contrarian signals. Technology stocks have become an important driver of cross-asset volatility. The bank continues to overweight equities, balanced by an underweight in credit, a short-term overweight in cash and a long-term overweight in bonds.
Recent cross-asset performance most closely resembles concerns over French public finances, but worries about AI financing are growing. Citi has added a USD/JPY volatility hedge and gone long UK and Spanish government bonds relative to French bonds; despite elevated credit stress, sector concentration keeps it preferring equities over credit.
Asian technology stocks have been sold off, but the regional earnings consensus for 2027 is still being revised upward. Goldman Sachs cut its KOSPI target from 12,000 to 9,000 points, while arguing that Korean valuations already price in excessively deep earnings downgrades. Its allocation approach places greater emphasis on value, financial quality and cash returns.
The 12-month target for the KOSPI was cut from 12000 to 9000 points, but Goldman Sachs believes pessimistic pricing in the memory sector has spilled over into other industries. Asian allocation places greater emphasis on earnings delivery, balance sheets and valuation discipline, while the AI supply chain also requires a distinction between demand growth and the pace at which profits materialize.
Goldman Sachs cut its KOSPI target from 12,000 to 9,000 points, while still seeing more than sixty percent upside. Its view rests on the Korean market’s deep discount relative to earnings; its regional allocation shifts toward cash flow, quality and shareholder returns, avoiding a bet solely on an index rebound.
Tech funds attracted 18.8 billion dollars in a single week, but market breadth weakened and AI financing costs rose. BofA maintains a short-term defensive stance while watching deflationary pressure in China and shifting toward US Treasuries and assets that benefit when yields peak.
