Stocks in correction territory

Before diving into the world of stocks, the Fed this week made a decision NOT to hike interest rates for now. This is good news for both stocks and bonds in the US.

The market is now betting on a hike in October, as shown our Cartesio Studio app:

US inflation remains elevated - if apparently fading in the short term - and the FED bias remains hawkish: ready to hike. Prospects for US bonds remain grim.

Meanwhile, in the world of stocks many indices are in correction zone:

• the Nasdaq is -7% down in a month, and -10% since 2 June 2026.

• Japan is down -12% in a month

• MSCI EM is down -9% in a month

A combination of geopolitical tensions, rising inflation and fading of the AI trade is beating the more volatile indices. Several sectors are down over 10% since early June.

The lost love for AI hyper-scalers is evident also in the prices of instruments that help investors defend themselves from insolvency risk - such as credit default swaps: the higher the spread, the more expensive the insurance.

As GROWTH (and momentum) stocks fall, the area where investors are finding consistent protection is VALUE.

Such a big fall since June is dramatic. Without bonds protecting, not much is shielding portfolios from negative news.

If you are assisted by a private bank, your banker has very likely not done much to adapt your portfolio to the recent market dynamics: spring leaders are down (Nasdaq, Emerging markets, Japan) while oil has been gaining momentum.

Cartesio - our AI system - has calmly adapted to the new environment in an effortless fashion for our investors:

• we selectively added/removed equities and/or commodities (see right end below)

• the Nasdaq (in orange) was reduced in June and progressively disappeared from the portfolio in July

• Japan also disappeared from our portfolio over the past two months, while we substituted core fragmented indices for a stable position into the MSCI World that changes with the appetite of Cartesio for stocks.

• In Europe, we have seen a steady rotation towards the value-tilted Spanish index (IBEX 35), value and low volatility

• The tilt towards commodities and oil recently turned more positive.

The portfolio is positioned as follows:

• long stocks, mixing defensive themes with classic indices

• low exposure to bonds, and eventually short-dated

• higher exposure to commodities and oil

In the recent dramatic developments, our investment strategy has moved to protect, yielding to a 4% return to date. This means that Pantarai ADAPT is 1% above the 60/40 portfolio with the same level of volatility, well inside the tunnel between the MSCI World on the top and global bonds on the bottom.

ADAPT is working as your autonomous investment portfolio of choice, constantly moving to protect your capital while exploiting return opportunities where available.

Speak soon

Nico