How did the markets perform in October 2026?

Tech pushed the market higher in September. In October, investors became more cautious and diversified into other sectors as well.

Rising interest rates were among the reasons why a growing number of investors began to ask whether tech stock prices are justified. In September, central banks in the United States, the EU and Japan raised interest rates, followed in October by Canada and India, among others.

When borrowing is more expensive, investors look more closely at whether the billions poured into artificial intelligence will actually pay off for companies. Investors therefore became more alert and started choosing more carefully the companies whose growth they believe in. Several tech giants also reported results below expectations, which sent their shares lower.

A good example is CoreWeave. It rents out computing power to giants such as Microsoft and Google, owes almost $50 billion, and lost a fifth of its value in a single day. News that Anthropic had filed to go public on a US stock exchange brought only brief relief.

The US S&P 500 index, which has been driven by the tech sector in recent months, fell by 0.9% in October. For our investors, however, the index delivered a gain of 0.25% thanks to the dollar strengthening against the euro. Because US stocks are traded in dollars, a stronger dollar brings a gain for our euro investors.

South Korea felt the increased caution of investors the most. Its stock market relies on chipmakers, and the swings are amplified by retail investors trading on margin. As a result, Korea's KOSPI index fell by 16% in October.

Despite the October decline, investors are not panicking. Earnings growth of companies in the S&P 500 index remains exceptionally strong. Companies outside the big tech “Magnificent Seven” are beating analysts' expectations. We therefore currently see the October correction more as a healthy reset of expectations, which allows investors today to buy shares in the largest companies at better prices than a few months ago.

However, the International Monetary Fund warned that the end of the AI investment boom could threaten both economic growth and financial stability. That is another reason why it does not pay to bet everything on a single sector.

In October, bonds fulfilled their traditional role as portfolio stabilizers. Most Finax investors use them as a complement to smooth out portfolio swings, or for short-term investments.

At the beginning of the month, government bond yields were unusually high, with some reaching their highest levels in decades. Since yields move in the opposite direction to prices, this meant bond prices were low. At the same time, high yields made bonds more attractive to new investors.

But when the sell-off in AI stocks came, some investors moved into the safety of government bonds, pushing their prices up and their yields down. For example, the yield on the 10-year US Treasury fell from 5.29% to 4.94%.

How can bonds protect a portfolio? Imagine a portfolio worth €10,000. If it is entirely in stocks and they fall by 10%, you lose €1,000. If it has 60% in stocks and 40% in bonds that rise by 1%, the loss shrinks to €560. So bonds will not stop a decline, but they significantly cushion it.

In exchange for more stable prices, bonds have historically delivered lower returns than stocks. That is why they are suitable mainly for shorter-term investments (where you cannot afford to wait long for a recovery from possible stock market declines), or for investors who could not handle high portfolio volatility. If you want to invest for the long term, ideally at least 10 years, stocks are the better choice.

Three risks continue to hang over the market:

1. Expensive energy
   Oil from the Persian Gulf is flowing again, albeit on the black market, but refinery outages in the Middle East and Russia are causing a diesel shortage. Chinese refineries suspended fuel exports for October and Russia extended its diesel export ban. As a result, Brent crude climbed back above $100 a barrel.
2. France
   The country was swept by protests against the high cost of living and the poor state of schools. However, the government has no room to spend more: France has not had a balanced budget since 1974, and the yield on its 10-year bond briefly exceeded 5%, the highest in 24 years. Fears of a new eurozone crisis are overblown for now. The swings are significantly smaller than those seen in Italy or Greece during the debt crisis in the previous decade.
3. Politics
   Elections in Brazil, Israel and Serbia showed that results can differ significantly from polls and that countries can change direction quickly.

Europe was also surprised by the resignation of European Central Bank President Christine Lagarde, at a time when the continent faces growing challenges.

On the currency markets relevant to us, the euro weakened by 0.3% against the Czech koruna, lost 0.13% against the Hungarian forint, and strengthened by 1.3% against the Polish zloty.

Among the ETFs in our portfolios, the fund of US mid-sized companies S&P 400 Mid gained the most, rising 3.15%. The biggest loser, on the other hand, was the fund tracking the MSCI Emerging Markets index of emerging market stocks, down 6.4%.

Among our Global Investing strategies, the conservative bond strategy posted the strongest gain, at 1.4%. The dynamic equity strategy fell by 0.6%.

In Calm Investing, the 1 to 3 Years strategy posted a gain of 0.4% and the Under 1 Year strategy 0.2%. As of 31 October 2026, their gross annual yields stood at 2.5% for the Under 1 Year strategy and 3% for the 1 to 3 Years strategy*.

What should we prepare for in November? Markets will be digesting the results of the US Senate, House of Representatives and gubernatorial elections. The Democratic Party won by a wider margin than expected, which could signal a shift in the political direction of the US for global markets.

What can we take away from October?

• Over short- and medium-term investment horizons, bonds serve as a useful portfolio stabilizer. When stocks fall, they help cushion the swings, just as they did in October.
• Even the most promising trend will not win forever. That is why we rely on diversification.
• Declines are an opportunity for regular investors. If you invest €200 a month and the price of an ETF falls from €100 to €80, you buy 2.5 units instead of 2, meaning a quarter more for the same money.

 *This is the gross yield to maturity as of 31 October 2026, as stated by the ETF providers. It is variable, linked to the ECB's deposit facility rate and interest rates in euro bond markets, and does not include the Finax fee of 0.5%. This yield may change in line with interest rate developments and is not a reliable indicator of future performance.