Reflections of the CIO September 2026… September 2026

September was a month during which international bond markets reasserted their influence over events, taking over from previous months when equity and commodity related themes had dominated the narrative. In addition, there was another twist in the Artificial Intelligence (AI) story, which played out with typical volatility. However, the dominant theme of last month was undoubtedly the mild panic attack in government bond markets, caused by a meaningful shift upwards in interest rate expectations.

The drivers of this shift were many, reflecting strengthening global economies, competition for capital from the corporate sector and the ongoing impact of high energy prices caused by the Middle Eastern conflict. Over the course of the last 12 months or so, these forces have combined to shift expectations away from a world where interest rates are falling into one where they are rising (and rising at quite a reasonable pace). During September the US, European and Japanese Central Banks had all raised their base rates, underlining the end of an era of loose, supportive monetary policy into one which is tighter and more restrictive.[1]

Such a change in the global interest rate regime inevitably caused its fair share of turbulence. The summer equity rally stalled, and commodity prices oscillated sharply. Investors found excuses to sit on their hands, preferring to wait and see how real world economic and geopolitical events played out before making any new decisions. This period of range trading was also complicated by a series of ‘AI Doomster’ stories, centring around the safety issues of ever improving AI agents. The CEO of Anthropic, the company behind the AI ‘Claude’, warned that unless the industry slowed down AI development, AI models could rapidly advance to a point where they could “take over the internet”, carrying severe risks of loss of human control, cyber-attacks and bioterrorism.[2] There are, he claimed, “existential risks to humanity”.[3]

Given the importance of the AI story to stock market performance and economic growth, such warnings from credible people carried weight and were debated extensively. They also sparked a pushback in some quarters. Some critics argued that by focusing attention on existential risks, AI companies were framing future harms as an unavoidable consequence of the technology itself, rather than something for which individual firms might ultimately be held responsible. We will not attempt to repeat all the arguments for and against the doomster scenarios but would note that, although the risk of very bad outcomes is real and rational, mitigations and solutions do exist and are being worked on.[4] Markets seem to take the same view, pausing to think through all the issues described in this report, rather than plummeting lower in anticipation of the end of the world.

As we began 2026, we had been positioning portfolios for a year during which returns would most likely be harder to come by. We didn’t anticipate the effects of war, nor the disconcerting warnings from parts of the AI universe, but we did see rising interest rates acting as a moderating force on market returns. The biggest surprise so far has been a positive one, in that despite everything thrown at it, the global economy has steadily gone from strength to strength, absorbing the macro shocks and providing the main reason for being more optimistic than pessimistic on outlook. This remains the case, even as ‘new’ AI related risks emerge.

One of the factors acting to underpin the outlook is that valuations have improved. Bond markets are offering yields not seen for decades and robust profits have increased the attractiveness of many equity markets and sectors.[5] Alternative assets continue to offer routes to generating returns and diversifying portfolio risk. Many of these (e.g. convertible bonds, hurricane insurance and options strategies) demonstrated resilient performance over the course of the year, including during periods of volatility in more traditional asset classes. As always, performance can nevertheless vary across strategies and market conditions. This set of factors helps to keep our investment outlook more ‘glass half full than half empty’ and, although we are always mindful of the risks, we will be increasing our focus on opportunities as we progress towards the end of an eventful year.