Issue 02 · Week 42 · 12–18 October 2026 · NY closes Fri 16 Oct · Published Mon 19 Oct
Summary
Regime read: Mixed, a defensive rotation inside a market that is holding. Funding pressure eased: nominal and real yields fell, the dollar softened and EM credit steadied. Risk appetite still narrowed sharply. Volatility rose by a third, growth and chip leadership broke, and money rotated into staples, healthcare, energy and utilities rather than leaving equities.
Regime | VIX | US10Y | Real yield | DXY | D1 Leading | D1 Inflow |
|---|---|---|---|---|---|---|
Mixed | 19.98 | 5.081% | 2.78% | 101.78 | 3 / 31 | 4 / 31 |
Last week's regime read vs what followed: consistent (Mixed; two of five risk-on measures). Three of nine Week 41 model states recorded a structure break, all on the growth side (SPY, QQQ, XLK).
Into: staples, energy, healthcare, utilities and value. Out of: semis, software, growth, Korea, Taiwan and EM.
Number of the week: XLP/XLY +5.39%, defensives over cyclicals by the widest margin in the record.
Key scheduled event: US flash PMIs, Fri 23 Oct at 14:45 UK.