Global Asset Allocation Viewpoints: U.S.
October 2026

The Fed lifts off as AI borrowing builds

Monthly insights on our portfolio positioning and the key themes shaping our views.

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  1. Asset Allocation
  2. Equities
  3. Bonds
  4. Key Themes

How we're positioned

Equities

Regions Styles and Market Cap

Bonds

Key themes

Easing off the accelerator

The first rate hike from the Federal Reserve (Fed) is best seen as a partial reversal of last year’s insurance cuts. Capital spending and demand remain firm, suggesting growth should remain resilient—leveling off rather than rolling over. Financial conditions remain accommodative, meaning businesses and households can still access capital. In other words, the Fed is easing off the accelerator, rather than slamming on the brakes. Inflation will decide how much further it needs to go, and policymakers appear to be placing more weight on how broad and persistent it is. If price pressures fail to cool while growth stays strong, further hikes become more likely, reinforcing the case for short duration.

A few hikes alongside resilient growth could be absorbed relatively well. A longer cycle driven by stubborn inflation would challenge both duration and risk assets.

(Fig. 1) Financial conditions are still accommodative

 

As of September 14, 2026.
Chicago Fed Adjusted National Financial Conditions Index, month-end readings of weekly data.
Source: Federal Reserve Bank of Chicago. See Additional Disclosures for more information.

Financing the build‑out

The AI investment cycle is entering a more capital-intensive phase, and hyperscaler balance sheets are no longer the whole story. Corporate bonds, data center financing, and chip-backed structures are forming a distinct AI credit ecosystem, with AI-related hyperscaler and infrastructure bonds rising from about 5.4% of the U.S. investment grade corporate benchmark at the end of 2025 to now 8.3%.1 Enterprise adoption is moving toward scaled production, even as regulation and safety draw more scrutiny. Continued investment and adoption support our overweight to U.S. growth stocks. While the risk of higher yields remains the main driver of our underweight, heavy AI-related issuance adds a technical headwind for investment grade bonds.

The same AI cycle can support corporate earnings while requiring enough new capital to create a tougher technical backdrop for investment grade bonds.

(Fig. 2) Investment grade bonds are expected to fund the largest share

Shares of an estimated USD 5.5 trillion in cumulative funding needed for AI and data center investment by source, 2026 to 2030. 
There is no guarantee that any forecast made will come to pass. 
Source: J.P. Morgan Chase. See Additional Disclosures for more information.

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Risks

All investments are subject to risk, including possible loss of principal. Stock prices can fall because of weakness in the broad market, a particular industry, or specific holdings. Fixed-income securities are subject to credit risk, liquidity risk, call risk, and interest rate risk. As interest rates rise, bond prices generally fall. Diversification does not assure a profit or protect against a loss in a declining market.

Additional Disclosures

1 Source: T. Rowe Price analysis, as of September 9, 2026.

Any specific securities identified and described are for informational purposes only and do not represent recommendations.

Over/underweights are based on Asset Allocation Committee (AAC) positioning except for UK and China (which are not separated in the AAC model). Those weights are based on the positioning of the UK Regional Investment Committee (RIC) (for UK) and the Asia RIC (for China).

These views are informed by a subjective assessment of the relative attractiveness of asset classes and subclasses over a 6- to 18-month horizon.

Fig. 1: Higher readings indicate tighter financial conditions and lower readings easier conditions.

Fig. 2: Information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. The index is used with permission.  The Index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright © 2026, J.P. Morgan Chase & Co. All rights reserved.

Visit troweprice.com/marketdata for additional legal notices & disclaimers.

Important Information

This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a guarantee or a reliable indicator of future results.

This information is not intended to reflect a current or past recommendation concerning investments, investment st rategies, or account types, advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Please consider your own circumstances before making an investment decision.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current however, we cannot guarantee the sources' accuracy or completeness.

There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part. be copied or redistributed without consent from T. Rowe Price.

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