While Tech Cools, Income Takes Its Turn

Dividends shine as tech cools

Amundi's weekly research describes a rotation in progress: the MSCI World High Dividend Yield Index gained 8% in the second half of the year, while the MSCI World Technology Index gave back all of the previous month's gains. Markets, Amundi writes, are now increasingly demanding clarity on cash generation from sizeable AI investments. m:…4506

The macro backdrop is mixed rather than decisive. U.S. initial jobless claims fell to 194,000 in the week ending October 17, and September housing starts fell to an annualized 1.22 million units. The Eurozone composite PMI fell to 51.9 in October from 53.1 in September, while Japan's inflation excluding fresh food and energy rose to 2.4% in September. m:…4506

The rotation, in other words, is less a verdict on growth than a repricing of patience: cash generation now, rather than AI payoffs later, is what the market is rewarding. m:…4506

Munis: a bruising quarter, heavy supply

PNC's municipal market quarterly review records a difficult third quarter of 2026. The S&P Municipal Index returned -5.57% in the quarter and -3.62% year to date, underperforming the Bloomberg U.S. Treasury Index by 253 basis points in the quarter. The municipal yield curve flattened by 25 basis points to 1.59%, with short-term yields up 119 basis points and long-term yields up 94 basis points. m:…7080

Supply was a major part of the story: third-quarter municipal bond issuance totaled $182 billion, bringing year-to-date issuance to $490 billion, a 12% increase on the first nine months of 2025. Municipal bond mutual funds saw net outflows of $3.5 billion during the quarter. m:…7080

Credit events added to the pressure. Brightline Trains Florida entered Chapter 11 bankruptcy protection in September, and at the end of the quarter Moody's downgraded $2.4 billion worth of federal lease-backed bonds to below-investment grade. Shorter paper held up better: municipal bonds with maturities or call features under five years outperformed intermediate and long-term maturities. m:…7080

Stable value closes the gap

Callan's comparison of stable value and money market funds shows a gap that has narrowed. The median stable value fund returned 2.3% from January 2022 to June 2026, compared with 3.7% for the money market peer group, but the margin by which money market funds outperformed narrowed to just 0.15% in the most recent quarter. m:…4605

The mechanics explain the lag and the recovery. The Federal Reserve raised its target rate by 525 basis points in less than 17 months, which hurt longer-duration stable value funds; since September 2024 it has lowered the overnight rate by 175 basis points. The median yield of underlying bonds in the stable value peer group rose from 1.5% at the beginning of 2022 to 4.6% as of June 2026. m:…4605

The longer view favors stable value: since 1988, the median stable value fund has returned 4.1%, compared with 2.8% for money market funds, and its return volatility since 2022 has been just 0.15%. The market-to-book ratio, which rose to 96.9% at the end of 2025, slipped to 96.1% over the first half of 2026 as intermediate-term rates moved higher, a reminder that the gap can widen again. The common thread is patience repriced: income now, rather than promises later, is what the quarter rewarded. m:…4605