As we enter the final quarter, it’s worth noting how many unexpected and traditionally market-negative things have happened this year. We’ve had war in the middle east, oil over $100, higher inflation, central banks hiking interest rates, bond yields surging and equity valuations falling. Normally a recipe for a down market, and yet stocks are still flying high. Despite all the negative headlines, economic growth has been stronger than we expected, and corporate earnings have been way stronger. Investment in AI (artificial intelligence) has certainly boosted profits, but the gains are wider, with energy, financials and other cyclicals doing well too. Returns have been healthy even as valuation ratios moderated. Of course, there is always something to worry about, and right now it’s the bond market. Higher inflation, rising interest rates, and deteriorating government credibility have undermined demand, while budget deficits and AI infrastructure developers are increasing bond supply. The question now is where and how do bond yields stop rising. In our outlook for the fourth quarter, we explore the causes and broader consequences of rising yields, and we look underneath the surface of global equity markets, at the earnings growth and the churn caused by AI and the war in Iran. We also examine what AI looks like from a sustainability perspective, and finally we provide an update on the private asset world, which is going through a period of flux at the moment. Should you have any questions in relation to the content within the Davy Wealth View, and what it means for your portfolio, please contact your Davy adviser.

Donough Kilmurray

Chief Investment Officer