FAQ - Monthly Investment Strategy - October 2026

BNP Paribas Wealth Management remains positive on global equities, maintaining an overweight position on US equities and Japanese equities while downgrading European equities to underweight due to persistent energy price pressures, weak domestic consumption, and sovereign debt concerns.

The upgrade reflects increased confidence in hyperscalers' return on AI investment and currently attractive global IT equity valuations, as technology companies are successfully monetizing their AI infrastructure buildout across enterprise and consumer workflows.

BNP Paribas Wealth Management remains positive on Euro IG credit, as BBB-rated bonds now yield 4.4%, approximately 1.2% higher than in February, reaching their highest absolute yield levels in almost three years at a time when corporate balance sheets and profit margins remain strong by historical standards.

Europe faces persistent headwinds including elevated energy prices, weak domestic consumption, logistical bottlenecks from low water levels on the Rhine, a sharp contraction in industrial manufacturing orders, and a lack of structural exposure to the secular AI hardware buildout.

BNP Paribas Wealth Management remains positive on precious metals, with a 12-month price target of USD 5,000 per ounce for gold and USD 80 per ounce for silver, as the recent correction offers higher upside potential.

No. The firm views the current cycle as gradual and modest, and since 1982 the S&P 500 has returned nearly 15% in the 12 months following a rate hike. It is fast, prolonged hiking cycles that have historically led to recessions and bear markets, not gradual ones.

The firm does not view AI as a valuation bubble in the way the dot-com era was, since today's Magnificent 7 leaders trade at far more modest multiples than networking giants like Cisco did in 2000. However, some earnings growth may be inflated by one-off revaluations of private AI stakes and circular financing between chip manufacturers and hyperscalers.

The firm targets a US 10-year yield of 4.75%, a German 10-year bund yield of 3.0%, and a UK 10-year gilt yield of 4.65%, while remaining positive on core eurozone sovereign bonds and upgrading UK gilts to positive.

BNP Paribas Wealth Management sets a 12-month EUR/USD target of 1.20, as the short-term strengthening of the US dollar is not expected to persist given rising US budget deficits and a gradual de-dollarisation trend.

The firm identifies three key risks: the rising cost of debt financing as hyperscalers increasingly invest beyond their operating cash flows, the growing risk of far-reaching AI regulation, and insufficient electricity power supply to meet surging AI infrastructure demand.