EMR October 2026
Dear Reader,
Available data on selected equity indexes are, as we will show, in contrast with widespread assumptions. The following chart of equity indexes and the EUR in USD speaks a language we find difficult to assess in the day-to-day discussions. Thus, let us first show and analyze the performances of the selected equity indexes, which might not be of interest only to us.
At first glance, the chart is indeed intriguing, isn’t it? The divergence of the “daily close values” is astonishing, both in terms of overall performance and in the two discernible main subperiods. The first subperiod covers 02.01.2020 to 01.01.2023, followed by a sizeable, short correction phase, and then a significantly diverging performance in both trend and magnitude. The best-performing indexes were the NASDAQ, closely followed by the NIKKEI and the S&P500. The worst performers over the same period were the SPI, followed by the CAC and the FTSE100 indexes.
These developments help explain why, on Sept. 16, 2026, the Federal Reserve raised its benchmark interest rate by 25 basis points to a target range of 3.75% to 4%, its first increase since 2023. Updated projections point to the possibility of another rate increase this year. FED Chairman Kevin Warsh explained that recent economic reports showed the economy, including the labor market, as being strong. Nevertheless, inflation remained above the central bank’s target range. He also added that tensions in the Middle East contributed to the Fed’s decision.
What might we deduce from the performance of the shown equity indexes, as well as the EUR/USD rate? The real question is whether it is not. All the implicit consequences point to forecasting difficulties, i.e., regarding comparability with past periods. In other words, the specific knowledge of the particular determinants is a tricky requirement.
Let us stress that the recent announcement by the FED on Sept. 16, 2026, approved its first increase in more than three years, while indicating that another increase might follow, as part of an effort to combat inflation, driven mostly by spiraling oil prices and other factors.
CURRENT EXPECATIONS
Looking back at the chart above, we see dramatic differences in the size of the developments between the two phases shown. Growth performance is significantly larger in the period since January 2023 than in the preceding phase. In addition, the disparities in the second phase are significantly larger, both concerning the specific trend as well as the respective de facto changes. The NASDAQ and the NIKKEI outperformed all other indexes, did they not? Astonishingly indeed is the performance of the Swiss indexes: SMI and SPI in CHF. In addition, it is worth noting that growth in the second phase varies much more than in the previous period.
Overall, we might ask: what factors drove both monetary and fiscal policy?
Another conclusion we can draw from the chart is that the trends are largely synchronous, while the disparities between equity indices vary much more, suggesting that the short-term trend may be useful for short-term trading. In addition, investors should focus on real developments far more than politicians’ arguments, given the divergent outcomes over time. What astonishes us most is the disconnect between politicians’ commentary and de facto developments.
Productivity growth is currently one of the most challenging economic issues, and one of the biggest decision-making errors is the incorrect assumption of relatively comparable productivity rates from country to country, mainly driven by policy-based arguments. What is clear is that technological innovation is, or can be, significant, but it differs from country to country and thus from one equity index to another. It is insufficient to measure production mainly in terms of working hours – just think of the rise in the price of crude oil and currency adjustments.
HOW TO BENEFIT IN A CHANGING ENVIRONMENT?
From an investment perspective, we are forced to make the following assumptions:
- Short- to medium-term, the overall rate of inflation is expected to be higher than generally anticipated by most analysts.
- Economic growth could be significantly lower than currently anticipated by many analysts, requiring a continuous reassessment from country to country, as well as from currency to currency, in which one wants to be invested.
- In addition, in the short- to medium-term, we expect inflation to be higher and economic growth to be significantly lower, requiring a continuous assessment of stocks, bonds and currency selection.
Another key factor we expect to shape the short-to-medium-term investment policy outlook is the expected weightings used by policymakers and investors. We believe that, overall, what will matter most is the specific focus on the three factors determining productivity in general, as defined by hours worked, energy productivity, and/or capital productivity. Contextually, we would appreciate knowing which order you think is going to be the most promising. Thank you in advance for your specific statement.
