October 2026 Market Scenarios: Technology Leads as Yields Drive the Outlook
The markets are entering October with technology almost single-handedly driving performance, weak bonds and a calendar that concentrates key decisions in the final week of the month. Three variables will determine how the month unfolds: energy prices, central bank decisions and corporate earnings. We outline three scenarios, without assigning probabilities, and identify the key levels to watch in each case.
How Markets Are Entering October
Our system classifies the cycle as an expansion, with a risk appetite and confidence score of 0.82. Beneath this label, however, the health of the 132 assets we monitor has deteriorated. The average Health Score fell from 52.7 to 47.0 over the past month. Assets in bullish territory declined from 40.2% to 22.7%, while those trading above their 200-day moving average fell from 65.2% to 51.5%.
The deterioration is mainly related to momentum. While 54.5% of assets still have a positive trend, 68.9% show negative momentum. Prices are maintaining the direction established over previous months, but recent momentum has weakened.
The United States remains the strongest of the major regions. Equities have an average Health Score of 49.2, almost unchanged, and 87.5% of assets remain above their 200-day moving average. Europe has lost 5.2 points and Asia 10.6 points. Emerging markets are showing a strong sell signal.
Leadership remains concentrated in technology, with a Health Score of 22.2 in the US. Bonds have the weakest signals, with the exception of the shortest maturities, where liquidity is showing a strong buy signal. Among commodities, only energy is in buy territory, while precious metals are showing a strong sell signal. The dollar has a Health Score of 64.1, one of the highest in the sample, while cryptocurrencies remain in buy territory at 61.1.
Financial conditions remain orderly, although some cautionary signals are emerging. The VIX volatility index rose from 14.92 to 16.34. The yield spread between high-yield bonds and government bonds widened from 263 to 312 basis points. Following September’s rate hike, the Fed funds target range stands at 3.75%-4%.
Key Events of the Month
Two factors run through the entire calendar. The first is the war between the United States and Iran, which began on February 28 and has put pressure on the Strait of Hormuz. The second is the rate-hiking cycle, with both the Fed and the ECB having already raised rates in September. Almost every event needs to be viewed through the lens of these two factors.
Macro Data
The month opened with the US employment report on October 2. Payrolls increased by 29,000 in September, versus expectations of 90,000, with unemployment at 4.2%. July was revised to a loss of 10,000 jobs and August to 133,000. Equity futures rose as traders reduced their bets on further rate hikes.
The most important release is US inflation for September, due on Wednesday, October 14 at 2:30 p.m. CET. It comes two weeks ahead of the Fed meeting. In September, the central bank projected inflation at 3.7% this year, falling to 2.3% next year. October data will only be released after the end of the month: employment on November 6 and inflation on November 10.
For Italy, the usual budget deadlines apply. The budgetary planning document must be submitted to Brussels by October 15, while the budget bill must be presented to Parliament by October 20.
Central Banks
In September, the Fed raised rates by 25 basis points in a unanimous decision. It was the first hike since July 2023. In its projections, 16 of the 18 participants expected another hike by year-end. The meeting is scheduled for October 27-28, with the decision due on Wednesday, October 28 at 7:00 p.m. CET, without updated projections.
The ECB follows the next day.
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