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The Magnificent 7 Are No Longer Just Stocks: They Are Asset Managers’ Biggest Dilemma

The world changes at terrifying speeds, and financial markets do too; today there is a reason why every quarter investors await the financial results of Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, and Tesla as if they were a leading indicator for the financial markets. No, it is not merely because they are seven of the most valuable companies in the world, but because a growing portion of global portfolios is exposed to them, directly or indirectly. Today, the Magnificent 7 are a genuine dilemma for asset managers, but there are dilemmas and then there are dilemmas; this one might not be entirely negative, but it has its own distinct peculiarities.

Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, and Tesla—the Magnificent 7—do not only concentrate an extraordinary portion of U.S. market capitalization; the real impact is that because their results, artificial intelligence investments, and growth expectations determine the behavior of indices, ETFs, and investment funds.

Therefore, for managers, the challenge is no longer deciding whether to have exposure to the Magnificent Seven, but how much to hold, how to diversify it, and what to do if market leadership begins to broaden. An investor may have never purchased a single share of Nvidia, yet that does not mean they do not hold it within an S&P 500 ETF, a U.S. growth fund, a global equity strategy, a pension plan, or a portfolio managed by a wealth manager.

This is the true financial dimension of the phenomenon. The so-called Magnificent 7 have become one of the primary transmission mechanisms between the artificial intelligence economy and investment markets. In this sense, their most recent financial results—now that we are in earnings season—show that the story is entering a new phase: it is no longer just about how fast their revenues are growing, but how much money they are forced to invest to sustain that growth and who will ultimately capture the benefits of the AI revolution.

Too Big to Be Ignored

According to Vanguard data, the seven companies combined generated approximately $2.2 trillion in revenue during 2025—a scale that helps explain why they ceased being a mere group of tech companies to become a macroeconomic and market factor. Concentration has also altered the nature of diversification; a fund tracking a market-cap-weighted index may hold hundreds of stocks, yet a significant proportion of its risk and return can end up depending on a relatively small group of companies.

This phenomenon concerns even major asset management firms. BlackRock, for instance, acknowledges that the U.S. market is at historically elevated levels of concentration and posits that the challenge for investors is finding exposure to AI growth without remaining excessively concentrated in today’s mega winners.

T. Rowe Price, for its part, has directly addressed the concentration problem created by the Magnificent Seven and its implications for portfolio construction. That is, the question is no longer whether the Magnificent Seven are good companies, but how much additional risk holding all of them introduces. Nevertheless, all seven are companies that cannot go unnoticed under any circumstances; together or apart, they are simply too big to ignore. Below is a brief summary of why that is the case.

Nvidia: The Company That Turned AI into Financial Results

If one company had to be chosen to represent the transformation of the stock market phenomenon into a financial reality, it would be Nvidia. On August 26, the company reported results for its fiscal 2027 second quarter. The numbers are extraordinary: revenues of $96.2 billion, up 106% year-over-year; Data Center revenues of $89.0 billion, up 117% year-over-year; GAAP net income of $59.7 billion, up 126% year-over-year; and a gross margin of 75%. The company expects revenues of approximately $108.0 billion for its fiscal third quarter.

For asset managers, however, there is an even more important figure: Nvidia is not merely selling chips; it is becoming the primary financial beneficiary of the massive capital expenditure cycle in artificial intelligence infrastructure. The company noted that AI infrastructure buildouts continue to accelerate and anticipated revenue growth of approximately 70% for fiscal year 2028, though it pointed out that its outlook remains supply-constrained. That shifts the conversation within investment funds: Nvidia is no longer just a technology play, but a bet on the capital expenditure of the entire technology industry.

Microsoft: The Other Side of the Boom

Microsoft represents the second major component of the equation: enterprise monetization of AI. In its fiscal year 2026, the company recorded the following figures: $331.8 billion in revenue, up 18% year-over-year; $155.2 billion in operating income, up 21%; and $133.7 billion in net income, a 31% increase. Azure and other cloud services grew 43% during the fourth quarter, according to company data. Meanwhile, Microsoft Cloud reached $214.4 billion in revenue for the fiscal year.

A figure of particular importance to an asset manager is that Microsoft closed the fiscal year with $678.0 billion in commercial remaining performance obligations—a signal of the tremendous visibility it holds over future revenues. But another factor is at play: the company is deploying massive amounts of capital into AI infrastructure, and its margins are beginning to feel the shift in business mix. For investors, a fundamental question emerges: How much of current AI capital expenditure will translate into profitable growth, and how much will weigh on cash flow?

Amazon and Alphabet: When AI Begins to Consume Cash

That same question emerges even more clearly at Alphabet and Amazon. Alphabet raised its 2026 capital expenditure guidance to a range between $195.0 billion and $205.0 billion, up from a previous guidance range of $180.0 billion to $190.0 billion. The company explained that the increase stems from the need to accelerate capacity to meet demand, but it also cautioned that technical infrastructure investments will drive up depreciation and data center operating costs while keeping cash flow under pressure.

This has a direct consequence for asset managers. Until now, the narrative could be summarized as: more AI investment = more growth. Now it is shifting toward: more AI investment = more growth, but also higher capital intensity and cash flow pressure. Amazon exhibits the same phenomenon. In the second quarter of 2026, its sales grew 20% to $200.6 billion, while AWS surged 37% to $42.2 billion. Operating income increased 43% to $27.5 billion.

However, its trailing 12-month free cash flow turned negative to -$7.6 billion, primarily driven by a $66.1 billion increase in purchases of property and equipment, fueled mainly by artificial intelligence investments. For a fund manager, this is a crucial distinction: revenue growth can remain extraordinary while free cash flow temporarily deteriorates due to capex. The question is when that spending will begin generating sufficient returns.

Meta Shows the Cost of the Race

Meta provides another example. In the second quarter, its revenues grew 28% to $60.8 billion, but its costs and expenses rose 55%. The result was a 14% decline in net income to $15.8 billion. The company spent $31.1 billion on capex during the quarter, while generating just $784 million in free cash flow.

For fund managers, this introduces a new variable: the market can no longer evaluate the Magnificent Seven solely through valuation multiples; additional factors must be scrutinized, including capex, depreciation, free cash flow, return on invested capital (ROIC), top-line growth, operating margins, energy consumption, data center demand, and, increasingly, the capacity to monetize AI models.

Apple and Tesla Break Group Uniformity

Signs indicate that the Magnificent Seven no longer behave as a homogeneous block. Apple reported record third-quarter fiscal 2026 revenues of $109.4 billion, up 16% year-over-year, driven by double-digit growth across iPhone, Mac, and Services. Tesla, by contrast, presented a far more complex picture. In the second quarter, it generated $28.2 billion in revenue, up 26% year-over-year, but its operating income fell 57% to $398 million, with its operating margin narrowing to 1.4%. Its capex surged 142% to $5.8 billion, resulting in a negative free cash flow of -$1.1 billion.

This highlights something important: the seven companies are no longer a single trade. Apple represents ecosystems, devices, and services; Microsoft and Amazon represent cloud and enterprise software; Alphabet represents search, advertising, and cloud; Meta represents advertising and social platforms; Nvidia represents AI hardware infrastructure; and Tesla represents electric vehicles, energy storage, autonomy, and robotics. That is why Vanguard cautions that the “Magnificent Seven” label can obscure critical differences among their underlying business models.

The Dilemma for Funds: To Hold or Not to Hold

The influx of figures and business models creates a genuine dilemma for asset managers. An active manager who drastically reduces exposure to the Magnificent Seven risks lagging their benchmark if Nvidia, Microsoft, or the others lead market rallies once again. Conversely, a manager maintaining elevated exposure risks significant relative underperformance if market breadth expands toward small-cap equities, traditional sectors, or international markets. Concentration has become a core risk management issue, not merely a stock selection decision.

BlackRock points out that while the U.S. market is at historical concentration levels, earnings growth prospects are beginning to broaden beyond the Magnificent Seven. The firm notes that the rest of the S&P 500 could narrow the EPS growth gap relative to the mega caps during 2026. As a result, market participants are asking whether it is time for asset managers to seek out the “Magnificent 8, 9, 10…”, as capital may begin migrating from the initial winners to their direct suppliers—a broadening of the investment universe that BlackRock is already highlighting.

In its outlook for the third quarter of 2026, the asset management firm notes that investors are seeking opportunities in the infrastructure, energy, and industrial layers supporting the expansion of AI beyond first-order beneficiaries, which could mark a major transformation for active management. If the first phase of the boom was about buying the mega-cap tech winners, the second phase may focus on identifying the supplier ecosystem capturing the next dollar of capital expenditure—a transition that is already reshaping portfolio construction.

The impact reaches directly into ETFs and index funds. A market-cap-weighted S&P 500 ETF automatically increases its exposure to companies as their market valuations rise. That means an extraordinary rally in Nvidia does not merely benefit direct shareholders; it also increases its weight within numerous index products. Thus, concentration can turn into a self-reinforcing loop: the stock rises → its market capitalization grows → its index weight increases → funds tracking the index must buy more exposure → capital continues to concentrate. This does not necessarily mean an automatic mechanism continues to push the stock higher, but rather that market capitalization dictates how passive capital is allocated. This phenomenon has reached the point where Nvidia accounts for roughly 8% of the S&P 500, according to data recently cited by MarketWatch.

For asset managers, this makes true diversification a far more complex concept. A fund may hold 500 constituents and still remain heavily exposed to the same underlying narratives: AI, cloud computing, semiconductors, digital advertising, and U.S. mega-cap equities.

The Big Question for 2027: What Is AI Really Worth?

Today, the issue is not that the Magnificent Seven are producing weak operational results; on the contrary, their figures remain extraordinary: Nvidia has doubled its revenues, Microsoft grows at a double-digit pace, Amazon is accelerating AWS, Alphabet is ramping up infrastructure investments, Meta is driving strong top-line growth, Apple posts record quarterly revenues, and Tesla is committing growing amounts of capital to AI, autonomous driving, and robotics. However, expectations are now so elevated that the market demands these investments produce increasingly higher returns.

BlackRock summarized this in its 2026 outlook, warning that AI-related capital expenditure has reached a scale large enough to carry macroeconomic implications, while the revenues derived from those investments will arrive with a lag. For fund managers and wealth administrators, the Magnificent Seven represent both an opportunity and a concentration risk.

The opportunity lies in participating in one of the largest technology investment cycles in history; the risk is that much of the market is already fully positioned in it. The next phase of asset management may not center on whether the Magnificent Seven will continue to win, but on discovering which companies will profit as the capital currently flowing into the Magnificent Seven spreads across the rest of the economy.

Alberto D’Avenia Returns to BNP Paribas AM to Lead Distribution in the Americas

| By Amaya Uriarte | 0 Comentarios

Photo courtesyAlberto D’Avenia, Head of Americas Distribution at BNP Paribas Asset Management

After spending over a decade working at various firms across Italy and Miami, executive Alberto D’Avenia has returned to BNP Paribas Asset Management. He announced his appointment via the professional networking platform LinkedIn after stepping into the role of Head of Americas Distribution at the asset manager.

In his new position, he will oversee the development of the firm’s distribution business across US Offshore and Latin America, serving both institutional and wealth segments.

However, sources familiar with the matter detail that D’Avenia oversees BNP Paribas AM’s liquid asset strategies. For illiquid alternatives, the executive in charge is Álvaro Correas, who serves as Head of Business Development and Investor Relations for Iberia and Latin America at CAPZA—the entity dedicated to private equity and private debt strategies within BNP.

Prior to returning to the group, D’Avenia spent three and a half years as Head of US Offshore at Voya Investment Management. Before that, he spent a decade at Allianz Global Investors, where he reached the position of Head of US Non-Resident Business and LatAm Retail.

A significant 13-year period of his career was spent holding various roles at BNP Paribas AM. He initially joined as Senior Client Relationship Manager in 2000 and advanced within the firm to become Head of External Distribution Sales for Italy and the Mediterranean Countries between 2011 and 2013.

Additionally, his professional background includes roles at Epta Fund SGR, Deutsche Bank Italia, Azimut, and Prime Consult SIM.

It is worth noting that the regional distribution team D’Avenia now joins includes John Barletta and Rafael Tovar. Barletta serves as Head of Sales at BNP Paribas AM, while Tovar is Head of US Offshore & LatAm Wholesale Distribution at AXA Investment Managers.

AXA IM was integrated into BNP Paribas AM in July of last year. Within the group’s corporate structure, the firm operates under the Investment & Protection Services division, which specializes in investment, savings, protection, and real estate services.

In addition to AXA’s agreement with AMCS—a Miami-based group focused on third-party distribution across Latin American and US Offshore markets—BNP Paribas Asset Management maintains a local presence with offices in Brazil and Mexico. Furthermore, the firm has an executive supporting product sales across the region: Pedro Pablo Montero, who is based in Chile.

Robeco Strengthens Its Commitment to Active ETFs in the U.S. Offshore Market

| By Amaya Uriarte | 0 Comentarios

Robeco presented its first two active ETFs—the Robeco 3D Global Equity UCITS ETF and the Robeco 3D Emerging Markets UCITS ETF—in Miami during a luncheon that gathered over 60 professionals from wirehouses, private banks, and broker-dealers across the offshore industry. The presentation was led by María Elena Isaza and Julieta Henke from LarrainVial, Robeco’s distributor in the US Offshore market, alongside Alejandra Saldías, Head of ETF Sales. It also featured participation from Ignacio Alcántara, Ana Curiel, and Jan Sytze Mosselar from the Dutch asset manager’s New York office.

The event took place against a backdrop of strong momentum for active vehicles within the ETF industry, a segment that has gained ground over traditional passive products in recent years. In this space, asset managers with a track record in quantitative management—such as Robeco—are seeking to position themselves by translating their analytical capabilities into a format increasingly demanded by offshore investors.

Executives During the Miami Luncheon

The Quantitative Strategy

During the meeting, Sytze Mosselaar, portfolio manager, explained the investment process of Robeco’s quantitative team and highlighted the opportunities generated by artificial intelligence’s growing weight in Asian markets. The new vehicles translate a strategy with a 20-year track record into an ETF format, managing three dimensions—risk, return, and sustainability—under an “Enhanced” approach that aims to boost index exposure while maintaining limited deviations.

This development adds to an active ETF platform that, in less than 18 months, has already reached €2 billion (around $2.32 billion) in assets under management—a growth rate that the asset manager itself highlights as a key indicator of the interest these products are generating among investors. With the launch of these two new funds, the products become specifically available to offshore segment investors, expanding the geographic reach of the strategy.

“One of Robeco’s Core Strengths”

When asked about what excites her most regarding the new products, Isaza focused on the manager’s quantitative expertise: “Robeco’s quantitative management is one of its core strengths and something that until now we had not been able to offer with this breadth on US Offshore market platforms. ETFs allow us to incorporate this expertise in a much more accessible way for our clients.” As she explained, the new format complements the existing familiarity financial advisors have with the firm: “This nicely complements the strategies advisors already know from Robeco, particularly in fundamental equity and credit. With Active ETFs, we expand that offering by now also incorporating quantitative expertise.”

The LarrainVial executive also framed the launch within the broader growth occurring across the global ETF industry—a phenomenon, she noted, that no asset manager can afford to ignore: “The ETF industry continues to grow significantly globally, and for us, participating in that evolution was essential. Now we can do so through Active ETFs as well, combining the advantages of the ETF structure with the quantitative management in which Robeco has a long track record.” For Isaza, the new product is also a tool to deepen commercial ties with network clients offshore: “This allows us to deepen relationships with our clients and position Robeco as a key partner, offering an increasingly broad set of solutions and capabilities to meet diverse portfolio needs.”

Isaza concluded her remarks with an assessment of the asset manager’s performance in building this platform, highlighting the speed with which Robeco established its market presence: “We are very excited about the growth Robeco has achieved. In just two years, it has secured significant asset inflows. The addition of Active ETFs marks a new chapter and significantly expands the opportunities we can develop with our clients.”

LarrainVial’s Role as Distributor

The partnership between the two firms began 20 years ago and today covers Chile, Colombia, Peru, and Mexico, with LarrainVial serving as the sales force in US offshore territories. Robeco reorganized its Americas operations in 2023 under the entity Robeco Americas, based in New York, and expanded its agreement with LarrainVial to include the wholesale business in US Offshore and Latam, based in Miami.

LarrainVial continued distributing Robeco funds to Latin American institutional clients as it had for the previous two decades. As part of that same transition, María Elena Isaza and Julieta Henke—previously directors and sales managers for Robeco’s US Offshore and Latam business—joined LarrainVial as managing directors while remaining based in Miami. Meanwhile, the integration of Robeco’s activities across the Americas was placed under the leadership of Ignacio Alcántara to drive service efficiency in a regulated and competitive market.

Two Months, Five Crashes, and a Warning: Wall Street Looks to the Past and Enters Risk Territory

| By Amaya Uriarte | 0 Comentarios

The stock market history of the world is full of episodes that turned autumn into a synonym for risk: 1929, 1987, 1997, 2001, and 2008 are a few examples of years that left behind some of the most violent trading days and periods in these markets.

September is, statistically, the worst month for U.S. equities, while October concentrates several of the largest crashes in history. The above is relevant because in 2026, the calendar once again finds a highly valued market, concentrated in technology and facing fresh pressures on interest rates, inflation, and geopolitics. Although nothing is written and no one can predict the future, it is always important to remember the lessons of history.

It is a fact: Wall Street is about to enter one of the times of the year that instills the most respect among investors; anything can happen.

Not because September or October have, in themselves, the power to cause a crisis. Financial history does not work according to calendars. But a hard-to-ignore coincidence exists: some of the largest episodes of stock market wealth destruction in the modern era occurred during these two months.

The most famous precedent is October 1929. But then came October 1987, October 1997, September 2001, and the dramatic September–October period of 2008. They are different episodes, caused by different problems, but all left the same lesson for asset managers: when a market reaches a zone of high confidence, leverage, concentration, or valuation, any catalyst can turn a correction into a crisis.

September is not superstition, it is the worst month on the calendar; October is the month of frights

The data partially supports the month’s bad reputation. The S&P 500 has historically recorded a negative average return close to -1% in September, making it the month with the worst average performance of the year. Data from S&P Dow Jones Indices show that, since 1928, September records an average return of approximately -1.03% and finishes with gains only about 44.7% of the time.

More recent data point in the same direction. For the long period analyzed by Dow Jones Market Data, both the S&P 500 and the Dow Jones Industrial Average lose an average of around 1.1% in September, while the Nasdaq Composite records an average drop close to 0.8%.

The statistics do not mean that September will be negative every year. In fact, the market can rise strongly during the month. What they mean is that, statistically, the distribution of outcomes is less favorable than in other months. And here appears the first important difference between September and October.

October has a worse reputation, but September is usually worse in terms of average return. October is, above all, the month of big frights. Cboe has noted that October has historically displayed the highest levels of monthly volatility for the S&P 500, although a large part of that characteristic is influenced by extraordinary episodes such as 1987 and 2008.

In other words: September tends to penalize performance more; October has a stronger historical association with extreme moves.

1929: The autumn that forever changed financial history

The first major chapter began even before October. During the 1920s, speculation drove the Dow Jones Industrial Average from 63 points in August 1921 to 381 in September 1929—an increase of approximately six times in eight years. The market reached levels that seemed to justify the idea that it had entered a new era of permanent prosperity.

But the reality was very different; after the September peak, signs of deterioration began. On October 28, 1929, the so-called Black Monday, the Dow lost nearly 13%. A day later, Black Tuesday, it plunged another 12%. By mid-November, the Dow had lost virtually half its value from its peak.

However, the real impact was much greater than the stock market crash; the collapse damaged bank and corporate balance sheets, caused credit contraction, and ended up becoming part of the process that led to the historic Great Depression, the worst U.S. economic contraction of the 20th century, which lasted from 1929 to 1941.

A historical clarification is important: 1929 did not cause the Great Depression on its own. The crash was the financial trigger of a much broader process involving monetary contraction, banking failures, deflation, falling international trade, and other factors.

1987: When the Dow lost 22.6% in a single day

Nearly six decades later, October again became synonymous with panic. It was October 19, 1987—Black Monday—when the Dow Jones plunged 508.32 points, equivalent to 22.61%, the largest single-day percentage drop in its history.

The figure remains impressive: the drop far surpassed the record of 12.8% set on October 28, 1929. The destruction of wealth was devastating; over $500 billion in market capitalization vanished from the New York Stock Exchange that day, while 604.33 million shares were traded, approximately three times the daily average at the time.

Yet 1987 left another fundamental lesson: a market can suffer an extraordinary crash without necessarily triggering an economic depression. The Federal Reserve reacted by providing liquidity to the financial system, and markets subsequently began to stabilize.

It also gave birth to one of the tools that forms part of today’s market infrastructure: circuit breakers, mechanisms designed to temporarily halt trading when declines reach specific thresholds.

1997: The Asian crisis reaches Wall Street

Ten years later, October proved once more that a crisis can travel quickly across regions due to a new era: the era of globalization. On October 27, 1997, amid the Asian financial crisis, the Dow lost 554.26 points, equivalent to 7.2%, after a plunge in Asian stock markets heightened fears regarding global growth and U.S. corporate earnings.

The episode was particularly relevant to the evolution of financial infrastructure; for the first time since their creation, circuit breakers were triggered on Wall Street. The market had to halt trading temporarily and close earlier than usual. The day proved that financial globalization had altered a core market feature: a localized shock could be transmitted to other continents in a matter of hours.

2001: September and the return of fear

The next major historical episode occurred precisely in September; after the September 11 terrorist attacks, U.S. markets remained closed for four trading sessions. When Wall Street reopened on September 17, 2001, the Dow Jones lost approximately 7%, while the S&P 500 fell around 5% and the Nasdaq close to 6.8%. The Dow lost nearly 679 points during the session, its largest single-day point drop at that time.

It was not merely an emotional reaction. The market was already weakened by the bursting of the tech bubble and a deteriorating U.S. economy; September simply concentrated the shock.

2008: When September stopped being a month and became a crisis

The most relevant episode for today’s investors may be 2008; on September 15, 2008, Lehman Brothers filed for bankruptcy protection. The Federal Reserve has described that moment as a turning point that triggered a massive retreat of investors from risky assets and a loss of liquidity in short-term funding markets.

But the crisis did not end with Lehman; Fannie Mae and Freddie Mac had been placed under government conservatorship, AIG faced a liquidity crisis, and the money market fund industry experienced heavy withdrawals after a fund broke the $1.00 net asset value barrier.

During September and October, massive sell-offs spread across virtually the entire financial system; October 2008 ended with a monthly decline for the S&P 500 of nearly 16.9%, ranking among the worst months in the index’s history. The market was no longer reacting simply to bad corporate news; it was pricing in the possibility of a systemic credit crisis.

That is perhaps the main difference between a stock market crash and a financial crisis: the former destroys market value; the latter can simultaneously paralyze credit, the banking system, and the real economy.

The pattern exists, but it is not a prophecy

For portfolio managers, the most important conclusion is probably also the least spectacular: September and October carry no financial curse.

In fact, October finishes with positive returns more often than its reputation suggests. Between 1950 and 2024, the S&P 500 ended October with gains approximately 59% of the time, with an average return close to 0.85%. The issue lies in the magnitude of the extreme episodes.

October includes three of the worst months in S&P 500 history: October 1987 (-21.8%), October 1929 (-19.9%), and October 2008 (-16.9%). That is to say, October does not necessarily drop more than other months; it simply possesses an extraordinary capacity to feature in history books when things go wrong.

Therefore, using the calendar as an automatic sell signal would be a mistake. But using it as a reminder to review risks can be a rational decision, especially when entering autumn with its own set of vulnerabilities—which is when historical comparisons acquire relevance.

Wall Street closed August with gains: the Dow gained around 2.1% during the month, the S&P 500 3%, and the Nasdaq 4.1%, according to recent data. But behind that strength lies a market that is particularly sensitive to expectations surrounding artificial intelligence, interest rates, and growth; at the same time, the macroeconomic landscape has grown complicated.

On another note, no less relevant, military tensions between the United States and Iran pushed oil prices above $90 per barrel at times, while global bond yields rose and the market began pricing in a higher probability of a rate hike by the Federal Reserve in September.

The FOMC meeting is scheduled for September 15 and 16, meaning the market will enter the month with one of its main catalysts occurring right within the historically weakest period for equities—a combination that is especially relevant for asset managers.

A market concentrated in a handful of technology companies can appear solid as long as investors continue paying elevated multiples for future growth. However, if expectations regarding interest rates, inflation, growth, or the return on artificial intelligence investments shift simultaneously, the same concentration that propels the market during rally phases can amplify losses during a correction.

Added to this is the growth of leveraged strategies and derivative products. In 2026, for example, the number of single-stock ETFs with leveraged or inverse positions has multiplied extraordinarily, accelerating the speed at which specific moves can transmit across equities and derivative products.

The real lesson for funds and wealth management

For fund managers, family offices, and wealth managers, the lesson of September and October is not to exit the market, but to ask what would happen to a portfolio if the scenario changes rapidly.

Historical lessons serve precisely that purpose: 1929 taught the danger of leverage and speculative bubbles; 1987 showed that automated trading mechanisms can amplify extreme moves and that market liquidity can vanish much faster than anticipated; 1997 confirmed that financial shocks travel globally; 2001 showed how a geopolitical shock can hit an already weakened market; and 2008 left perhaps the most important lesson for institutional investors: the real risk lies not just in falling stock prices, but in the simultaneous disappearance of liquidity across multiple markets.

That is why, as September 2026 begins, history is not saying that Wall Street will necessarily fall, but it is saying something far more useful for a professional investor: when valuations are elevated, positions are concentrated, and the cost of money becomes a market variable once again, it pays to enter autumn asking not how much higher a portfolio can go, but how much it could lose if history decides to repeat itself.

Because September does not cause crashes, but history proves that when a market enters autumn feeling vulnerable, September and October have proven capable of turning a crack into a fracture.

Post-Vacation Analysis

| By Amaya Uriarte | 0 Comentarios

Markets were hit this Monday by a fresh escalation of hostilities between the United States and Iran, featuring U.S. strikes against IRGC targets on Larak Island in the Strait of Hormuz, and Iranian retaliatory measures against the United Arab Emirates and Jordan. Markets also had to digest the hawkish speech delivered by Fed Chair Kevin Warsh at Jackson Hole, where he reaffirmed the 2% inflation target and noted that “there is work left to do.” As an immediate result, the probability of a Fed rate hike in September quickly jumped from 36% to 67%.

U.S. Bonds: Normalization, Not Fiscal Alarm

The U.S. Treasury yield touched annual highs, approaching 4.8%, while Japanese sovereign debt (with JGBs near 3%) and German debt (Bunds at 3.3%) were also affected.

News regarding U.S. debt reaching $40 trillion helped amplify the noise, though the numbers point in the opposite direction: the historical correlation between the debt-to-GDP ratio and real rates (TIPS) is negative, because until 2017 the government only increased spending substantially during recessions. The fiscal outlook projected by the Congressional Budget Office (CBO) analysis is not optimistic, but for now, nominal economic growth (according to the New York Fed’s model) far exceeds the 10-year bond yield—suggesting that borrowing costs are not onerous for investment—and, surprisingly, Trump has not fulfilled forecasts, as the budget deficit has remained fairly stable since 2024 despite everything.

For all these reasons, although the uncertainty introduced into the macro picture by the closure of Hormuz, the war in Ukraine, Trump’s fiscal policy, or the Fed’s abandonment of forward guidance has impacted bonds, the rise in yields has less to do with the fiscal picture than with the normalization of growth, inflation, and rate trends.

We are coming off a very peculiar 2010–2020 decade, marked by disinflationary dynamics, household and corporate balance sheet deleveraging, and below-potential growth that led major central banks to adopt zero interest rate policies.

Over the past two years, we have witnessed a macro normalization, with inflation rates slightly above the comfort zone and more robust GDP growth. As a result, 10-year real interest rates in the United States have returned to the range where they fluctuated in the mid-2000s, still well below the levels reached in the 1990s, and the term premium has also regularized.

Despite the noise, bond yields have followed the historical pattern of behavior maintained over the last 30 years relative to interest rate expectations (approximated via SOFR futures). This serves to prove that the yield spike has more to do with a new economic reality than with a higher perceived threat of default associated with U.S. debt.

Similarly, if we model the U.S. bond yield using the latest update of the Fed’s economic projections report, we can conclude that the asset is trading at a certain discount, attributable to the uncertainty affecting energy prices.

However, households and businesses are less sensitive to rate hikes than in the previous decade. Their balance sheets have been repaired since then: household debt as a percentage of GDP hovered around 100% between 2008 and 2009 and today stands at 64.85%, levels not seen since 1997. Furthermore, their leverage ratio relative to net worth is at 60-year lows. In the corporate sector, according to the NFIB survey, management teams show no significant concern over interest payments on their debt.

On the Fed, Inflation, and the Labor Market

Additionally, labor market activity and inflation may ease Warsh’s task in the coming months. Bloomberg’s inflation and job creation surprise indices point to a moderation in the Fed’s hawkish stance, a conclusion similar to that drawn from the Truflation index, which incorporates the prices of millions of daily transactions. The August price index data, set to be published on September 11, will have major implications.

An advance indicator came on Thursday with comments from Christopher Waller, who validated signs of easing inflationary pressures while remaining watchful for evidence confirming a trend toward the 2% target. Following his intervention, futures shifted to price in only a 52% probability of a September rate hike. If the monthly core figure comes in at +0.2% as estimated by consensus economists, the Fed will likely maintain a hawkish tone without altering benchmark rates.

In the labor market, we continue operating in a “few layoffs, few hires” environment, although we may be losing some momentum in recent months. The private ADP job creation indicator has maintained a downward trajectory since March, while the Kansas City Fed labor market conditions indicator has yet to find a floor.

Equities: Resilience and Valuation

All told, investors may be overestimating the impact that a 5% yield could have on stock market performance.

The deleveraging process carried out between 2010 and 2020 substantially improved the balance sheets of households, businesses, and banks, making them more resilient to rate increases. Despite tighter credit, demand remains steady or is even improving.

The S&P 500 P/E ratio has compressed from 23x to 19x, and historical evidence shows that the relationship between moves in 10-year bond yields and valuations is inconclusive.

To the extent that the adjustment toward a normalized rate environment remains gradual, earnings-per-share growth will drive valuations over the coming months.

M&G Reports Its Best Results Since 2019

| By Amaya Uriarte | 0 Comentarios

CC-BY-SA-2.0, FlickrAndrea Rossi, Chief Executive Officer of M&G plc, parent company of M&G Investments

In a market characterized by macroeconomic complexity, M&G plc has demonstrated the strength and resilience of its business model by recording its best half-year performance in seven years, consolidating a deep and successful transformation toward a low-capital-intensity operating profile. In this regard, Andrea Rossi, Chief Executive Officer of the Group, noted: “The business is delivering a solid performance, with an adjusted operating profit of £435 million [€504.6 million], up 15% year-on-year, representing our best first-half result since our IPO in 2019. We continue to execute our strategy, successfully orienting the Group toward high-quality, low-capital-intensity (capital-light) earnings, which now account for 80% of total adjusted operating profit.”

This robust performance is underpinned by operational milestones during the first half of 2026 that evidence the success of the corporate strategy. Despite environment volatility, the firm attracted net inflows into its open business worth £2.4 billion [€2.784 billion], an achievement primarily supported by M&G Investments, the Asset Management division, which drew net subscriptions from external clients worth £2.2 billion [€2.552 billion]. The firm reports that numbers were positive across both retail and institutional channels, backed by its expansion in the United Kingdom and internationally.

At the same time, M&G reinforced the diversification of this division by raising external client assets under management and administration to £189 billion [€219.24 billion]—equivalent to 53% of total assets under management for the segment—of which £110 billion [€127.6 billion] comes from international investors. This commercial dynamism also translated into a contribution of £13 million [€15.08 million] in new annualized net revenues within Asset Management, where investor interest in high-value solutions—especially in private markets, which recorded net inflows of £1.3 billion [€1.508 billion] and reached £83 billion [€96.32 billion] in assets—continues to serve as a strategic pillar of growth.

To contextualize these solid capital flows, Rossi added that “net inflows of £2.4 billion [€2.784 billion] in open business reflect the breadth and strength of our offering. Asset Management contributed £2.2 billion [€2.552 billion] in net inflows from external clients, of which £700 million [€812 million] was channeled through our strategic alliance with Dai-ichi Life Group.” This commercial success not only consolidates current figures, but accelerates the firm’s structural shift. Along these lines, the executive further elaborated on the group’s evolution, stating: “M&G continues to grow and transform, becoming a more diversified, efficient, and less capital-intensive business. With a clear strategy, disciplined execution, and the right resources, I am confident in our prospects for the second half of 2026 and our ability to deliver sustainable long-term value to our clients, partners, and shareholders.”

Maintaining the established plan

Looking ahead, the firm stated that it considers itself to be in a privileged position to sustain this financial momentum, relying on its competitive advantages in structurally growing markets. The company’s roadmap is firmly focused on preserving its financial strength, simplifying the organization, and driving profitable growth. In terms of profitability, the entity reiterates its commitment to achieving average annual pre-tax adjusted operating profit (AOP) growth of at least 5% for the 2025–2027 triennium.

Thanks to the business’s strong performance so far this year, management expects to close the 2026 financial year with a low double-digit increase in AOP on a full-year basis.

In parallel, the group is making progress toward its operational efficiency target after recording a cost-to-income ratio of 73% in the first half, with the expectation of continuing to improve it in the second half of the year to approach its 70% target. Likewise, the entity confirms that it is moving at an optimal pace to meet its cumulative operational capital generation target of £2.7 billion [€3.132 billion] for the 2025–2027 period.

Invesco Appoints Saúl Santamaría to Strengthen Its ETF Commercial Strategy in Latin America and US Offshore

| By Amaya Uriarte | 0 Comentarios

Invesco, one of the world’s leading independent investment managers, has appointed Saúl Santamaría to reinforce its commercial team and expand coverage for its ETF business in Latin America and the US Offshore market.

With this appointment, Invesco reinforces its commitment to these markets and its strategy to remain ever closer to its clients and distribution partners in the region. In his new role, Santamaría will work closely with institutional clients, distributors, and intermediary networks, contributing to the development of strategic relationships and the expansion of Invesco’s ETF platform.

This strategic move comes amid growing interest in ETFs as efficient, transparent, and flexible tools for portfolio construction. In recent years, Invesco has experienced strong growth in this segment and already holds over $20 billion in assets under management across ETFs in Latin America and US Offshore, consolidating its position as one of the leading providers in both markets.

Santamaría brings 20 years of international experience in the asset management industry, with a track record focused on fund distribution and business development in Latin America and US Offshore. Before joining Invesco, he served as Head of Distribution for US Offshore at Goldman Sachs Asset Management, where he led the commercial strategy for this market. Previously, he held senior positions at Compass Group, Carmignac, and Amundi, serving in various commercial management roles for Latin America, including opening Amundi’s office in Mexico and managing the regional distribution business. He began his professional career at Société Générale Asset Management (SGAM) in Paris.

He holds a degree in Finance and International Relations from Universidad Externado de Colombia and a Master of Science in Management from NEOMA Business School in France. He speaks Spanish, English, French, and Portuguese.

Santamaría will report to Laure Peyranne, Head of ETFs for Iberia, Latin America, and the US Offshore market. Peyranne noted that Santamaría’s appointment “reinforces our commitment to these markets and will allow us to continue staying closer to our clients. His extensive international experience in distribution, deep understanding of Latin America and US Offshore, and proven track record will be key as we continue to build our ETF business. We want to remain closely attuned to our clients’ needs, offering them top-tier service alongside innovative, efficient investment solutions tailored for portfolio construction.”

In addition, Íñigo Escudero, Country Head at Invesco for Southern Europe, Latin America, and US Offshore, emphasized that “Saúl’s support, Laure’s leadership, and our operational capabilities and infrastructure across Europe and the United States will allow us to continue expanding our footprint in markets with immense growth potential. Our ability to combine active management, ETFs, and specialized investment solutions puts us in a privileged position to meet our clients’ needs.”

With the addition of Saúl Santamaría, Invesco’s Madrid office will comprise 22 professionals. The Southern Europe, Latin America, and US Offshore region oversees a total of over $100 billion in assets under management as of July 31.

Within DWS’s CROCI Methodology: From a Value Framework to an Economic Measurement Framework

| By Amaya Uriarte | 0 Comentarios

Photo courtesyColin McKenzie, Head of the CROCI Strategy at DWS.

In this industry, having a sound methodology can mean the difference between the success of investment strategies and being just another manager. Since 1996, DWS has used its own proprietary valuation methodology to analyze global companies, known as CROCI. According to Colin McKenzie, Head of the CROCI Strategy at DWS, it is not merely a value framework—it is an economic measurement framework.

He notes that this approach allows them to identify opportunities across value, quality, and growth, and to build strategies capable of participating in vastly different market regimes while anchoring to the same underlying philosophy. In this interview, McKenzie discusses how the methodology has evolved, what it entails, and what it contributes to their investment strategies.

How has the CROCI model evolved?

The core objective of the CROCI methodology has remained unchanged for over 30 years; what has evolved is our capability to execute it, as corporate reporting standards and disclosure requirements have improved significantly over time. For instance, the model was enhanced to reflect the growing use of employee stock option plans in the early 2000s; adjustments for operating leases grew more sophisticated as disclosures improved (though, more recently, many have been brought fully onto the balance sheet under specific conditions); and, more recently, the expanding availability of ESG-related information has provided additional insight into companies’ long-term economic sustainability.

At the same time, the rise of intangible assets has made economic analysis more important than ever. Traditional accounting often treats investments in areas such as research and development, software, intellectual property, and brand building differently from physical investments, making comparisons across companies and sectors difficult. CROCI aims to correct these distortions wherever possible, enabling companies to be evaluated on a more economically consistent basis.

A defining feature is that it recalculates the balance sheets of hundreds of companies to derive their true Economic P/E. How often is the database for these companies reviewed and updated?

The CROCI database is continuously updated by a dedicated team of analysts who review company models whenever new financial information becomes available. Across our entire global coverage, this accounts for approximately 70,000 hours of company analysis and database updates each year. Each company is reviewed using a consistent economic framework, which helps ensure comparability across sectors, regions, and accounting regimes.

This depth of research is one of the main differentiating factors of the CROCI process and reflects the importance we place on understanding the true economic position of every business. At the same time, the process is designed to be agile. Under normal market conditions, company models are continuously updated as new information arrives. However, during periods of exceptional economic shift or uncertainty, we can accelerate the process significantly.

This combination of analytical depth and responsiveness enables us to maintain discipline, even during periods of market volatility and earnings seasons. While market sentiment and stock prices can swing rapidly, our goal remains ensuring that the underlying economic data is as current and comparable as possible. As valuations adjust, the investment process can respond efficiently using the latest fundamental company data without needing to alter the core investment philosophy.

Why is the Cash Return on Capital Invested metric particularly useful for fund selectors today compared to traditional P/E or Price-to-Book ratios?

Traditional valuation metrics, such as the price-to-earnings (P/E) ratio or price-to-book ratio, can be useful, but they are heavily influenced by accounting conventions and often fail to offer a consistent foundation for comparing companies across different sectors, countries, and business models. This challenge has become even more acute in a world where intangible assets, intellectual property, and software play an increasingly central role in value creation.

The CROCI framework addresses this by rebuilding these indicators from an economic perspective, creating a consistent measure of the capital invested in a company and the cash returns generated by that capital. Investors can view this as conducting venture capital-style due diligence on publicly traded equities.

What advantages does this offer?

This allows us not only to calculate a more meaningful valuation indicator, such as the Economic P/E, but also to derive consistent measures of quality—through the cash return on capital invested—and growth—through changes in a company’s underlying economic earnings power. This distinction is vital because, ultimately, investors need to understand not just how much they are paying, but why they are paying it. By placing valuation, quality, and growth on the same economic footing, CROCI enables investors to compare companies on truly equivalent terms.

For fund selectors, this can be especially valuable in today’s market environment, where valuation dispersion remains elevated and accounting indicators often struggle to reflect the true economic reality of modern businesses. The strength of the CROCI framework lies in providing a consistent lens through which to evaluate valuation, quality, and growth together, allowing capital to be allocated based on economic reality rather than accounting presentation.

Today’s quantitative universe is dominated by multi-factor strategies driven by big data or advanced algorithms. What sets CROCI’s quantitative approach apart?

We view CROCI as an active, systematic approach, so in many respects it can be seen as a blend of both. Portfolio construction is systematic and rules-based, which brings consistency, transparency, and repeatability. However, the foundation of the process is fundamentally research-driven, rather than relying on statistical factor mining or purely data-driven optimization.

The most important part of CROCI is not the portfolio algorithm, but the underlying economic analysis of the companies. Our analysts reconstruct financial statements to understand how companies actually create value, generate cash flows, and earn returns on capital.

For that reason, we often describe CROCI as a systematic approach to fundamental investing. The research process is grounded in fundamental analysis, while portfolio execution is systematic. This combination allows us to apply the discipline of quantitative investing without losing sight of the economic realities of the companies in which we invest.

AI Will Transform Asset Management Operations

| By Amaya Uriarte | 0 Comentarios

A global study of 178 senior asset management executives published today by Clearwater Analytics reveals a decisive shift in the asset management industry: a majority of managers expect artificial intelligence to transform their front-, middle-, and back-office operational functions over the next 12 months. The study, titled “GenAI and the Data Divide,” indicates that 62% of managers expect AI to transform how firms generate and synthesize information, 58% expect a radical change in decision-support systems and portfolio recommendations, and 57% anticipate a transformative impact on predictive modeling and stress testing.

Adoption is accelerating in tandem: 95% of firms increased their budget allocated to AI last year, and 85% plan to increase it by at least an additional 50% over the next 12 months. However, the analysis also identifies the key factor in capturing this transformation: a 23 percentage point gap exists between how entities value the completeness of their data versus its accuracy. While 79% consider their data to be complete, only 56% believe it to be accurate. This divide is emerging as the primary differentiator between firms realizing measurable returns on their information and those still waiting to monetize it.

A Year of Operational Transformation

The report reflects significant consensus among investment professionals regarding where AI will deliver the deepest impact over the next 12 months. Leading the list is content automation and data synthesis: 62% of managers are confident that AI will facilitate a profound or transformative shift in generating standardized reports and synthesizing complex data into concise summaries.

The industry’s reliance on predictive modeling will also undergo an AI-driven overhaul. Fifty-seven percent of respondents anticipate a transformative impact on how their firms analyze historical and current data to forecast results and evaluate stress-testing scenarios. Close behind, 58% expect AI to revolutionize decision-support systems, specifically by proposing potential actions or parameter adjustments, such as rebalancing portfolios based on specific objectives and constraints.

Souvik Das, Chief Technology Officer (CTO) at Clearwater Analytics, stated: “Our data shows that the global investment community is no longer just curious about AI. It is deploying it to solve the most labor-intensive operational tasks in asset management. By automating the heavy lifting of data synthesis and scenario modeling, firms are reclaiming thousands of hours that can now be redirected toward alpha-generating activities.”

Tactical Success in Day-to-Day Operations

The study also provides an assessment of the effectiveness of AI tools currently in use. Far from being a theoretical benefit, AI is already delivering measurable tactical advantages in daily work.

The first advantage is natural language interaction: 73% of surveyed managers rate the use of natural language AI agents to query data-dense investment platforms, risk management systems, and reconciliation tools as “effective.” Second is deep analysis: 62% of respondents consider AI agents effective for delving into complex topics like regulatory compliance, with nearly half (47%) describing these tools as “very effective.”

Third is workflow automation: The drive toward straight-through processing continues to gain momentum, with 63% of managers successfully using AI to automate repetitive workflows, such as daily report generation. The final advantage is multi-agent orchestration: 62% of firms report success in using AI to trigger operations based on data thresholds or specific schedules, indicating progress toward more autonomous and sophisticated system behaviors.

Solving the Data Dilemma

Data quality has historically been one of the industry’s greatest challenges. This study demonstrates that managers now understand why it is more critical than ever. Seventy percent of surveyed professionals note that deploying AI has intensified their focus on data governance, with 8% describing this shift in focus as “drastic.” Two-thirds (66%) consider their AI tools effective in managing the intricacies of alternative data—an area historically complex to scale.

That progress in alternative data is real. However, it has failed to close the truly decisive gap: only 56% of firms rate their data as accurate or reliable, compared to 79% that consider it complete. AI is focusing attention on data, but it has not yet resolved the underlying trust issue.

“What is striking is that AI adoption is forcing fund managers to confront data management fundamentals like nothing ever has before,” adds Souvik Das. “The confidence observed in alternative data management is telling. It suggests that firms investing in AI are also the ones investing most in ensuring data accuracy, and that both priorities must advance hand in hand. It represents a fundamental shift in how the industry perceives complexity,” he concludes.

Divergence in Adoption

Although most of the sector demonstrates an optimistic stance, the study highlights a growing divide between leaders and laggards. In several areas—such as software delivery and workflow coordination—between 12% and 18% of managers still foresee “little or minor impact” from AI. This divergence suggests that while the technology is ready, firms’ internal infrastructure and cultural maturity vary significantly.

The Impressions Left by Kevin Warsh’s First Jackson Hole

| By Amaya Uriarte | 0 Comentarios

Wikimedia CommonsKevin Warsh, Chair of the US Federal Reserve

At a time when monetary policy and interest rates are front and center, all eyes have recently been turned toward the US Federal Reserve and its new chair: Kevin Warsh. Last week, during the central bankers’ symposium in Jackson Hole—held in the town of the same name in Wyoming—the official surprised global investors with a tone that was somewhat more hawkish than expected.

The event served as a platform for the economist to reaffirm his commitment to the fight against inflation. This left international markets with the impression that reference rate hikes could occur in the North American country this year. However, Warsh did not refer to the Treasury’s announcement regarding increased government bond buybacks.

“Warsh did not surprise much at Jackson Hole, maintaining a generally hawkish tone and a commitment to price stability without signaling an imminent rate hike or setting a policy threshold,” noted Alessia Berardi, Head of Global Macroeconomics at the Amundi Investment Institute. This message, she explained, represents a “major hurdle” for rate cuts and maintains a higher-for-longer bias, with further tightening still possible if inflation accelerates.

“The speech confirmed little appetite for alternative views on what matters most to the Fed and a limited preference for forward guidance. Short-term interest rates will remain the primary tool, with unconventional tools playing only a limited role,” the professional noted.

From EBC Financial Group, market analyst Felipe Mendoza agrees with the diagnosis. In his view, Warsh’s somewhat hawkish tone deviated from market expectations and emphasized the 2% target for inflation. “This stance could reaffirm that the Federal Reserve will prioritize the fight against inflation even if it means extending or tightening the monetary cycle, immediately raising the probability of a September rate hike to 50% in the futures market,” he stated.

Market Expectations

Broadly speaking, the Fed chair’s remarks do not stray from the norm. For Paul Donovan, Chief Economist at UBS Global Wealth Management, the content of the speech “was not particularly deep,” emphasizing consumer prices rising above 3%, without mentioning the impact of tariffs driven by Donald Trump’s White House on them. “In the absence of any inflation shock, the comments are consistent with stable US monetary policy,” he noted.

What stands out about this particular speech—Warsh’s first at Jackson Hole—is that it follows a Fed meeting that felt different, marking a style that is harder for investors to read.

On this occasion, wrote Seema Shah, Global Strategist at Principal Asset Management, “Warsh cleared up much of the ambiguity left by the July FOMC press conference, providing a clearer picture of a Federal Reserve that keeps its focus firmly on bringing inflation back to its target and is prepared to raise rates if progress stalls.”

While the expectation at Principal—and among other global market participants—is that upcoming inflation data will show improvement, the probability of a rate hike in September increased. “The positive market reaction highlights that investors value clarity in monetary policy, even when that clarity comes accompanied by a more restrictive message,” Shah said.

For Mendoza at EBC Financial Group, the market reaction is less conclusive. “The asset response to this speech reflects a hasty recalibration of expectations in an environment of high volatility. The initial strength of the dollar and the correction in the S&P 500 responded to short-term rate adjustments; however, market dynamics showed interesting decoupling nuances,” he commented. “Following the initial impact of the remarks, markets eased and even reversed their initial direction,” he added.

For the analyst, this “mixed reaction across different assets suggests that the market has not yet fully priced in the scenario.”

A New Style at the Fed

The Fed is always on the radar of international financial institutions, given the importance of US interest rates to the global economy. But in the Warsh era, investors are paying particularly close attention, searching for signals in an environment of lower visibility.

“From day one, Warsh has abandoned forward guidance. He wants financial markets to assess economic prospects rather than be guided by a Fed that telegraphs its moves; in this way, as he has argued, market pricing will provide useful information to the Fed itself,” explained Sonal Desai, CIO of Fixed Income at Franklin Templeton, in a recent market commentary.

Furthermore, for some, this presentation put the spotlight on the Fed’s credibility at a time when global capital is growing increasingly nervous about US debt.

“US risk assets have performed well for years, but bond investors are increasingly demanding compensation in the form of higher yields,” stressed Allianz GI in a commentary authored by Chief Economist Christian Schulz and Fixed Income CIO Jenny Zeng.

As the professionals explained, “bond investors have to absorb growing financing needs stemming from investment in artificial intelligence, high fiscal deficits, and debt refinancing.” This occurs, they added, in an environment where some of the primary sources of demand are weakening, as households are saving less, the Fed continues to shrink its balance sheet, and international investors are diversifying their reserves.