Week Ending: October 30, 2026
Boomtown, USA
Decomposition Of Real Private Demand Growth, 4-Quarter Moving Average
Sources: Bureau of Economic Analysis, Payden Calculations
*Tech = consumer spending and business investment on computer software, hardware, and tech-related infrastructure, as a share of total private domestic demand in GDP
The Federal Reserve held rates steady at its October meeting this week as policymakers await more data before hiking again. Well, data released a day after the meeting suggest the U.S. is in a growth boom. Real GDP grew at a 3.4% annualized rate in the third quarter. Excluding inventories, government spending, and trade, private demand accelerated to a 4.9% pace, the fastest quarterly gain since the fourth quarter of 2017, excluding the Covid-19 recovery. More interestingly, while the AI investment boom continue to drive growth, consumer spending has also accelerated. As Fed Chair Warsh said at his October Federal Open Market Committee (FOMC) press conference, “high-tech investment is leading the acceleration,” but the capex story is broadening to other sectors of the economy. For the Fed, while stronger growth doesn’t necessarily imply more inflationary pressure, a resilient economy suggests policymakers can focus squarely on its inflation mandate, with core inflation on track to miss the 2% target for six years and possibly longer. The Fed wanted to wait for more data to justify more hikes. The data answered, loudly.
Total Returns By Asset Class
Highlights of the Week:
High Yield: The high yield market has seen less than $10 billion of net new issuance in October, compared to September’s record net issuance of $36 billion. Issuers have largely stood down as the market digests volatility in rates and in AI-related issuers. It is a sign of market health that issuers have the financial wherewithal to wait for more favorable conditions before issuing. Balance sheets and maturity profiles are generally sound, which has helped keep spread volatility in check.
Corporates: Microsoft tapped the market this week for $25 billion across 10 tranches, ending a three-month drought in hyperscaler issuance. This was Microsoft's first bond issuance since 2017, with books topping out at $115 billion, the sixth largest on record.
Municipals: Municipals (Munis) held firm this week despite rising Treasury yields, supported by exchange-traded fund (ETF) demand and moderating supply. Weekly fund inflows reached $1.7 billion, the strongest since July, though $3.5 billion in ETF inflows masked $1.8 billion in open-end fund outflows as tax-loss harvesting continued. October’s rally has left short-term munis near their richest relative valuations in three years, while longer maturities retain more value.
Equities: The U.S. equity market modestly declined after an earnings-heavy week, as persistent concerns over AI spending weighed on technology-related stocks and prompted a rotation toward more traditionally defensive areas of the market. By sector, technology and communications lagged the broader market, while health care, industrials, and consumer staples outperformed.
Securitized Products: The collateralized loan obligation (CLO) market saw lower prices this week as spreads moved modestly wider at the beginning of the week amid macro volatility and weaker overall sentiment. Since then, the market has stabilized, and spreads moved tighter to close out the week, with elevated but healthy secondary volumes. New issuance picked up ahead of next week’s midterm elections but was well absorbed by demand.
Disclosure: This material reflects the firm’s current opinion and is subject to change without notice. Sources for the material contained herein are deemed reliable but cannot be guaranteed.
