Chart Book · Q3 2026

Missing Opportunities: From Shocks to Shock Absorbers

Ten charts from the Chief Investment Office, brought to life. Scroll to watch each one build.

01

What Is The Next Move?

BaseBullBearGrizzlyCIO scenarios and possibility outcomes80%possibility outcome of a combined bull and base casescenario for all of 2026. We expect a “proud” bull market withmore normal returns driven by very solid earnings growth ratherthan a stampeding bull we experienced in 2023 to 2025.CIO ViewBig positive reversalin Technology shareshelped supportbroader rebound.CIO Base Case ViewEquity markets and the global economy should continue to undergo aperiod of transformation, with short periods of volatility and new avenuesof growth beginning to develop again. The buildout of the digitalinfrastructure continues and outweighs the surge in oil prices plus theconcern over higher yields.CIO ViewEquities remained wellsupported by elements likeearnings expansion, arelatively solid economicbackdrop, and easiermonetary policy.CIO ViewThe market continued toclimb the wall of worry,pierce through the noise andtrend higher; buoyed byhigher double-digit earningsgrowth, a broadeningamongst sectors, and strongfundamentals. AI and datainfrastructure investmentaccelerated.

Scenario 1 Bull case

25% possibility outcome

  • Bull case for risk assets as investors increase allocations in Q4.
  • Geopolitical tensions ease significantly and peace accelerates.
  • A new economic re-expansion builds, and growth is well above trend in 2026.
  • Extended pause on rates with profits and economic growth well above trend.
  • Yield curve steepens as yields on the back- end rise as economic growth increases above trend and short rates slip.
  • Long-term bull market continues as earnings rise much higher-than-expected through 2026. Bull market in metals.
  • AI capital investment (capex) accelerates despite proposals for slowing down the advancement - lifting the Technology sector again.

Scenario 2 Base case

55% possibility outcome

  • U.S. GDP maintains its momentum as the consumer remains resilient and capital investment growth stays strong.
  • One-time price increases from oil and gas surge do not materialize into an “economy-wide” resurgence in long run inflation.
  • Limited hikes later in the year or a pause on rates as signs of inflation peaking develop.
  • Earnings growth for S&P 500 is high double-digit percentages for the full year 2026 or better.
  • The AI wave continues but “leaders” and “laggards” become clearer.
  • Broader participation within the Equity markets including Emerging Markets, Value and Small- and Mid- cap shares continues.
  • Financials, Industrials, Basic Materials, Energy rise. Pockets of Technology sectors resume their leadership. Healthcare stocks improve.
  • Slightly weaker U.S. Dollar.

Scenario 3 Bear case

15% possibility outcome

  • Bear case would ensue if capital investment in AI peaks and begins to drop.
  • Geopolitical tensions spike further.
  • Stagflation worries build as the growth slump bites and inflation remains well above target.
  • Expectations for monetary policy are recalibrated with the potential for multiple rate hikes rising sharply even in the face of slow growth.
  • Earnings begin to decline earlier than expected as a growth slump ensues and AI capex fizzles.
  • Defensive areas of the market outperform as technology bubble concerns materialize.
  • Recession odds rise alongside midterm concerns.
  • Fiscal spending drops more than expected and the consumer pulls back considerably.

Scenario 4 Grizzly case

5% possibility outcome

  • Trade wars develop again and stick.
  • Geopolitical tensions boil over into much broader conflict.
  • Sharp economic hard landing, not just deterioration, unfolds.
  • Fed policy requires new emergency measures and aggressive cuts.
  • A sharp fall in earnings ensues as spreads widen and AI capex deteriorates.
  • Credit stress unfolds further in the lower quality credits impacting investor sentiment in the high-quality sector.
  • Fixed Income significantly outperforms Equities as risk aversion rises sharply.
  • U.S. dollar rallies.
  • Defensive assets outperform sharply.
  • S&P 500 falls into protracted bear market territory.

Black line represents the lifecycle of the CIO economic process and is not meant to represent any specific investment, index or performance of any kind. Source: CIO. Data as of October 6, 2026. CIO views are subject to change. FOR INFORMATIONAL PURPOSES ONLY. Economic or financial forecasts are inherently limited and should not be relied on as indicators of future investment performance. Please refer to index definitions and important disclosures at the end of this presentation.

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02

A Capex Boom for the Ages

Annual Capital Expenditures (Capex), USD Billions$0$500$1,000$1,500$2,000$2,50020222023202420252026E2027EHyperscalersS&P 500 ex-Hyperscalers
  • Capital investment is a primary driver of the current economic expansion. This includes investment in data centers, semiconductors, power generation, defense infrastructure, and more.
  • Hyperscalers* are expected to spend nearly $800 billion in capex in 2026, or 90% higher year-over-year. Excluding the Hyperscalers, capex of S&P 500 companies is expected to run close to $1 trillion.
  • Broader capital spending should continue to be supported by ongoing themes including the reindustrialization of the global economy, reshoring, and automation and robotics.

Source: FactSet. Data as of September 30, 2026. *Hyperscalers include Amazon, Google, Meta, Microsoft and Oracle. E = estimates. Latest data available. FOR INFORMATIONAL PURPOSES ONLY. Indexes are unmanaged and do not take into account fees or expenses. It is not possible to invest directly in an index. Past performance is no guarantee of future results. Please refer to appendix for index definitions and important disclosures.

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03

Mapping this Bull Market’s Trajectory: How High? How Long?

S&P 500 Cumulative Bull Market Price Return (Trough to Peak)CurrentBull MarketAverage Bull MarketLength and MagnitudeAverage Bull Market (>3 years old)Length and Magnitude0%100%200%300%400%500%600%700%0123456789101112Jun 1949 - Aug 1956Oct 1957 - Dec 1961Jun 1962 - Feb 1966Oct 1966 - Nov 1968May 1970 - Jan 1973Oct 1974 - Nov 1980Aug 1982 - Aug 1987Dec 1987 - Mar 2000Oct 2002 - Oct 2007Mar 2009 - Mar 2020Mar 2020 - Jan 2022Oct 2022 - ?Years Since Trough
  • The S&P 500 has gained around 114% since the October 2022 trough, overcoming numerous challenges ranging from tariffs and geopolitical conflicts to bouts of market volatility.
  • Importantly, this cycle has been supported by fundamentals, particularly robust corporate earnings, alongside structural tailwinds from reshoring, re-industrialization, robotics and a renaissance in biotechnology that continue to support the expansion.
  • While no cycle follows the same path, history suggests this rally may still have room to run. Since 1949, bull markets have averaged roughly 192% returns over roughly 5.5 years, while those lasting more than three years have historically delivered closer to around 234% over nearly seven years.

The red dashed arrow line illustrates the path from the current bull market to the length and cumulative price return of the average bull market since 1949. The purple dashed arrow line illustrates the path from the current bull market to the length and cumulative price return of the average bull market since 1949 that has lasted more than three years. Dotted lines are for illustrative purposes only. Source: Bloomberg. Data as of September 30, 2026. FOR INFORMATIONAL PURPOSES ONLY. Past performance is no guarantee of future results. It is not possible to invest directly in an index. Please refer to appendix for index definitions and important disclosures.

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04

Bull Market Leadership Continues to Evolve

Magnificent 7*107%67%25%9%Magnificent 7Russell 1000 Growth43%33%19%6%Russell 1000 GrowthS&P 50026%25%18%13%S&P 500MSCI Japan20%8%25%23%MSCI JapanMSCI EAFE18%4%31%10%MSCI EAFERussell 200017%12%13%14%Russell 2000S&P 500 Equal-Weight14%13%11%10%S&P 500 Equal-WeightRussell 1000 Value11%14%16%19%Russell 1000 ValueMSCI EmergingMarkets10%8%34%23%MSCI EmergingMarkets2023202420252026 YTDAnnual Total Return Rankings across Major Equity Segments
  • While the Magnificent 7 and U.S. Large-cap Growth led the early years of the rally, leadership has started to broaden.
  • EM, Japan and U.S. Large-cap Value have moved up the performance rankings, highlighting a wider opportunity set across region, style and size.
  • Rather than signaling weakness among former leaders, we believe this market rotation reflects healthier market participation.
  • The takeaway: market leadership can change quickly and often unexpectedly. Maintaining diversified Equity exposure may help investors participate in potential emerging opportunities without relying on a single market segment or investment theme.

Total returns referenced in USD for all indexes. Net Total Returns used for all MSCI Indexes. 2026 YTD returns are through September 30, 2026. *Magnificent 7 (Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, Tesla) represented by Bloomberg Magnificent 7 Total Return index. Source: Bloomberg. Data as of September 30, 2026. FOR INFORMATIONAL PURPOSES ONLY. Indexes are unmanaged and do not take into account fees or expenses. It is not possible to invest directly in an index. Past performance is no guarantee of future results. Please refer to the appendix for asset class proxies, index definitions and important disclosures.

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05

Stocks Lead the Way: Real Returns After Inflation

10.23.31.101234567891011StocksBondsCashAverage Annual Total Returns After Average Annual Inflation (%) (1978-2025)
  • Geopolitical conflicts have contributed to elevated inflation in 2026. The risk may warrant a closer look at real returns across asset classes throughout history.
  • Since 1978, Equities delivered annual total returns that far exceeded the rate of inflation, on average. Bonds also provided moderate returns after inflation, on average, while offering additional sources of income and stability in portfolios.
  • Meanwhile, cash has faced a more challenging path with rising prices over the long-term. While it is essential that investors maintain appropriate levels of cash in portfolios, it should not be viewed as a long-term investment.

Source: Bloomberg. Annual data as of December 31, 2025. Latest data available. Stocks = S&P 500 Index. Bonds = Bloomberg U.S. Aggregate Bond Index. Cash = ICE BofA U.S. 3-Month Treasury Bill Index. Annual total returns after average annual YoY U.S. Consumer Price Index referenced for inflation. FOR INFORMATIONAL PURPOSES ONLY. Indexes are unmanaged and do not take into account fees or expenses. It is not possible to invest directly in an index. Past performance is no guarantee of future results. Please refer to the appendix for asset class proxies, index definitions and important disclosures.

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06

New All-Time Highs Rarely Signal the End of the Market's Advance

101001000100001950195519601965197019751980198519901995200020052010201520202025S&P 500 (Log Scale)All-Time Highs DatesS&P 500 Index (Log Scale)S&P 500 Forward Price Returns(1950 - September 2026)+1-year+2-years+3-years+5-yearsForward Returns from All-Time Highs (n=1371)Average8.7%16.9%28.1%51.3%Median10.1%13.2%24.6%47.8%% Positive73.0%82.1%88.6%84.4%Forward Returns from All Other DaysAverage9.5%19.4%29.4%52.8%Median10.6%18.4%28.7%53.0%% Positive74.8%83.1%85.2%84.1%
  • Contrary to popular perception, investing at an all-time high has historically produced forward returns that are broadly similar to investing on any other day. Since 1950, average S&P 500 returns following a new high have closely tracked returns from all other starting points.
  • New highs are rarely isolated events. Instead, they tend to cluster during bull markets as strong economic growth, earnings expansion, and investor confidence support continued market gains.
  • While every bull market eventually ends with an all-time high, only a small fraction of record highs have marked a lasting peak. Of the 1,371 all-time highs recorded since 1950, only 11 ultimately represented bull market tops, highlighting the risk of avoiding new highs altogether.

Source: Bloomberg. Data as of September 30, 2026. FOR INFORMATIONAL PURPOSES ONLY. Indexes are unmanaged and do not take into account fees or expenses. It is not possible to invest directly in an index. Past performance is no guarantee of future results. Please refer to appendix for asset class proxies, index definitions and important disclosures.

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07

Patience Pays: Let Time Work for You

S&P 500: Frequency of Positive vs. Negative Annualized Total ReturnsAcross Rolling Holding Periods(1950 – September 2026)71%74%80%89%90%94%97%100%100%29%26%20%11%10%6%3%0%0%0%10%20%30%40%50%60%70%80%90%100%3-months6-months1-year2-years3-years5-years10-years15-years20-yearsPercentage of Rolling Holding PeriodsRolling Holding Periods% of Positive Periods% of Negative Periods
  • History shows longer holding periods increase the likelihood of positive returns. Over every 15- and 20-year rolling period since 1950, the S&P 500 delivered a positive annualized total return—100% of the time.
  • In other words, investors who stayed invested for 15+ years never experienced a negative average yearly return, even through recessions, wars, inflation, shocks and crises.
  • Why? Short-term volatility tends to smooth out over time. Losses early in the period have been historically offset by recoveries and the power of compounding later.
  • The key message is simple: Markets may feel risky day-to-day, but the longer you stay invested, the more often you may experience gains. Time does not eliminate risk, but it has historically helped to shift the odds of success in your favor.

Annualized total returns based on monthly data. Source: Bloomberg. Data as of September 30, 2026. FOR INFORMATIONAL PURPOSES ONLY. Indexes are unmanaged and do not take into account fees or expenses. It is not possible to invest directly in an index. Past performance is no guarantee of future results. Please refer to appendix for index definitions and important disclosures.

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08

The Risk of Avoiding Risk

$64k$456k$784k$0$100,000$200,000$300,000$400,000$500,000$600,000$700,000$800,000$900,00020072008200920102011201220132014201520162017201820192020202120222023202420252026Hypothetical Portfolio Value Exit market and invest in cash Exit market and reinvest after 1 year Stay invested in market
  • Indiscriminately selling out of the market has the potential to influence long-term portfolio outcomes:
    • If you started out with a $100,000 Equity portfolio at the beginning of 2007, and you sold at the market bottom to invest in cash, you would only have around $64,000 today.
    • If you sold at the bottom and reinvested in Equities after one year (i.e., attempted to time the market), you would have about $456,000 today.
    • If you had stayed invested throughout the entire time frame, your initial investment of $100,000 would have grown to around $784,000 today.

Source: Bloomberg. Data as of September 30, 2026. Equities are represented by the S&P 500 Index. Cash is represented by the ICE BofA U.S. 3-Month Treasury Bill Index. Latest data available. FOR INFORMATIONAL PURPOSES ONLY. Indexes are unmanaged and do not take into account fees or expenses. It is not possible to invest directly in an index. Past performance is no guarantee of future results. Please refer to appendix for glossary, asset class proxies, index definitions and important disclosures.

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09

Power Play: Why the BES(S)T Has Yet To Come

2591628405374901061211381431471521590102030405060708090100110120130140150160Gigawatts (GW)Cumulative Utility-Scale U.S. Battery Energy Storage Systems (BESS) Capacity through 203512020202120222023202420252026202720282029203020312032203320342035
  • Battery storage has entered a structural growth cycle: accelerating renewable penetration, AI-driven power demand, and grid modernization are driving record investment in energy storage as a critical pillar of the evolving power system.
  • Flexibility is the new constraint: as renewable capacity scales, storage is increasingly required to balance intermittency, reduce curtailment, and match electricity supply with demand.2
  • The result is a durable investment cycle: storage deployment, grid infrastructure, and battery supply chains are poised for sustained growth as power systems become more flexible and decentralized.

1Bloomberg New Energy Finance, New Energy Outlook 2026, May 2026. Under the Economic Transition Scenario, which accounts for firm near-term policies but assumes no further support beyond existing measures. Years 2026-2035 are estimates. 2S&P Global US Grid Outlook 2026: Renewables Add Over 90 GW as Data Center Demand Tests Reliability. FOR INFORMATIONAL PURPOSES ONLY. Please refer to appendix for important disclosures.

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10

Volatility is Normal

S&P 500 Index Price Return-10%-13%-23%26%9%3%14%4%-38%23%13%0%13%30%11%-1%10%19%-6%29%16%27%-19%24%23%16%12%-17%-30%-34%-14%-8%-7% -8%-10%-49%-28%-16%-19%-10%-6% -7%-12%-11%-3%-20%-7%-34%-5%-25%-10%-8%-19%-9%-60%-50%-40%-30%-20%-10%0%10%20%30%40%200020012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023202420252026Annual ReturnsMax Intra-year DrawdownAverage Return (2000-2025) = 8%Average Intra-year Drawdown (2000-2025) = -16%
  • Remember that market volatility is normal and is an integral part of investing. Even years that culminate in positive returns overall can see notable intra-year drawdowns.
  • Since 2000, annual returns for the S&P 500 have always been greater than the max intra-year drawdown by an average of 24%.
  • Moreover, in the 3-, 6-, and 12-months after the S&P 500 enters >10% correction territory, the index has seen average forward returns of 5.6%, 11.0%, and 13.6%, respectively.**

*2026 returns through September 30, 2026. **Refers to market corrections from 1980-2025. Source: Bloomberg. Data as of September 30, 2026. Price returns referenced. FOR INFORMATIONAL PURPOSES ONLY. Indexes are unmanaged and do not take into account fees or expenses. It is not possible to invest directly in an index. Past performance is no guarantee of future results. Please refer to appendix for glossary, asset class proxies, index definitions and important disclosures.

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