Monthly Review – September 2026
OUR PERSPECTIVE – THE PRICE OF SECURITY
“In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of.” ~ Confucius (551–479 BC)
Travelling through China reveals a profound paradox.
At the micro level, society is vibrant: warm, welcoming citizens and ambitious technology leaders pushing the boundaries of science and innovation.
At the macro level, however, China is drowning in debt and sinking into a dangerous deflationary trap.
For a long time, the world assumed China’s authoritarian growth model was invincible. Today, domestic growth has quietly abandoned the mainland. China’s seemingly sole remaining pulse comes from flooding global markets with cheap export volume. Onshore, domestic prices are flatlining, consumer demand are faltering and animal spirits have seemingly turned to ice.
One can also observe the stark two-speed economy. While the affluent continue spending on luxury and outbound travel, the middle class is trading down, triggering price wars that erode corporate profits. The numbers paint a clear picture: retail sales grew a meagre 1.1% in the first eight months of the year, whereas exports surged nearly 15%. Most alarming is fixed asset investment, which fell -7.7%. Even when stripping out the real estate sector, it remains down over -4%.
In a capitalist system, zero inflation brings paralysis rather than stability. Growth requires converting dormant savings into higher risk, productive investments. China is not short of capital; it is drowning in cash that refuses to circulate. Expecting lower prices tomorrow, consumers defer spending today. Lacking pricing power, businesses freeze expansion. Capital retreats into safe-haven savings accounts, causing the velocity of money to drop toward zero.
If Beijing hopes to avert a multi-decade stagnation that could make Japan’s “Lost Decades” look mild, Beijing must pivot away from supply-side industrial subsidies and aggressively reignite demand. Below are three options me might see on the table:
1. Direct Demand Stimulus: Aka ‘Helicopter Money’. One option is to replace factory subsidies with direct cash transfers and high-expiry consumption vouchers issued directly to households.
2. Social Safety Net Overhaul: The CCP could also expand healthcare, education, and pension coverage to permanently unlock trillions held in precautionary defensive savings.
3. Explicit Monetary Reflation: The People’s Bank of China (PBOC) could adopt explicit inflation or nominal GDP targets backed by direct asset purchases, signalling that idle capital will lose purchasing power over time.
China’s economic engine is not merely slowing down; it is freezing from within. Unless Beijing forces capital out of bank vaults and back into the marketplace, its reign as the world’s growth engine will end with a quiet whimper.
Japan’s Lost Decades refers to the prolonged economic stagnation that began in the early 1990s following the collapse of the nation’s massive real estate and stock market bubbles. Characterized by persistent deflation, sluggish GDP growth, near-zero interest rates, and mounting public debt, this period deeply restructured Japan’s financial ecosystem.
Market Review
Deflationary Boom Assets
(Equities, Corporate Bonds, EMD)
September delivered mixed performance across growth assets as renewed inflation pressures and central bank rate hikes put pressure on equity valuations. Japan (+1.7%, USD) were the top performing market, buoyed by structural corporate reforms. Conversely, Europe lagged significantly following European Central Bank monetary tightening and fell almost 5% in USD terms, while the S&P 500 (-0.35%) and Emerging Markets (-0.54%, USD) recorded mild pullbacks as rising Treasury yields capped risk sentiment.
Deflationary Bust Assets
(Government Bonds)
Long-duration sovereign bonds suffered significant losses as market expectations adjusted to higher-for-longer interest rates. The Vanguard Long-Term Treasury ETF tumbled as much as 5% for the month, worsening its Q3 drawdown (-8% USD), as Treasury yields pushed higher across the curve.
Inflationary Boom Assets
(Commodities & Managed Futures)
Trend-following strategies outperformed as systematic models captured multi-asset momentum driven by volatile energy markets and rising yields in government bond markets. Our basket of Managed Futures gained +3.5% in USD terms in September, extending strong Q3 (+10.9%) and YTD (+15.7%) performance. Surging medium- and long-term government bond rates and commodity price swings provided fertile positioning ground for CTAs across FX and yield curves.
Inflationary Bust Assets
(Precious Metals & Inflation-Linked Bonds)
Rising real interest rates and dollar firmness exerted heavy pressure on precious metals. Silver was the worst performer across all assets, plunging -13% in September, whilst Gold declined c. -8%, eroding prior gains during the quarter. Despite the decline, gold still finished Q3 up 3.7%. Inflation-linked securities also struggled, with the iShares 0-5 Year TIPS Bond ETF falling c. 1% as short-dated nominal yields rose faster than near-term inflation expectations.
Source: OECD, J.P. Morgan Asset Management, Guide to the Markets – UK, 27/08/2026.
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Shard Capital Partners LLP is a limited liability partnership, registered in England with registration number OC360394. Shard Capital Partners LLP Registered office: Floor 3, 36-38 Cornhill, London, EC3V 3NG. Shard Capital Partners LLP is authorised and regulated by the Financial Conduct Authority in the United Kingdom, reference number 538762.
This document is provided for information purposes only and is intend for confidential and sole use by the recipient. It is not to be reproduced, copied or made available to others. The information set out in this document does not constitute investment advice or a personal recommendation. The views expressed in this document are not intended as an offer or a solicitation, to purchase or sell any security or other financial instrument, credit or lending product or to engage in any investment activity.
Past performance is not a guide to future performance. It is important that you understand that with investments, your capital is at risk. The value of investments, as well as the income derived from them, can go down as well as up and investors may get back less than the original amount invested. It is your responsibility to ensure that you make an informed decision about whether to invest with us, based on your particular objectives. If you are still unsure if investing is right for you, please seek independent advice.
The information and opinions expressed within this document are the views of (the company) and are based on information we believe to be reliable, but we do not represent that they are accurate or complete, and they should not be relied upon as such. Any information provided is given in good faith but is subject to change without notice.
No liability is accepted whatsoever by (the company) or its employees and associated companies for any direct or consequential loss arising from this document.
Disclaimer:
This document is provided for information purposes only and is intend for confidential and sole use by the recipient. It is not to be reproduced, copied or made available to others. The information set out in this document does not constitute investment advice or a personal recommendation. The views expressed in this document are not intended as an offer or a solicitation, to purchase or sell any security or other financial instrument, credit or lending product or to engage in any investment activity.
Past performance is not a guide to future performance. It is important that you understand that with investments, your capital is at risk. The value of investments, as well as the income derived from them, can go down as well as up and investors may get back less than the original amount invested. It is your responsibility to ensure that you make an informed decision about whether to invest with us, based on your particular objectives. If you are still unsure if investing is right for you, please seek independent advice.
The information and opinions expressed within this document are the views of (the company) and are based on information we believe to be reliable, but we do not represent that they are accurate or complete, and they should not be relied upon as such. Any information provided is given in good faith but is subject to change without notice.
No liability is accepted whatsoever by (the company) or its employees and associated companies for any direct or consequential loss arising from this document.