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Friday Focus - October 16, 2026
10/16/26
FRIDAY FOCUS: Smart insight and clear visuals that matter – what we’re watching now and how intention and conviction shape our portfolios.
Markets
Beneath the Headlines, Corporate Profits Remain Resilient
When you decompose 2026 S&P 500 performance, earnings growth (teal line) has powered ahead while valuation multiples (blue line) have moved lower. In other words, companies are continuing to book strong profits, but investors are paying less for those earnings than they were at the start of the year. That derating reflects a lower P/E multiple being attached to today's profit stream. Higher interest rates, geopolitical uncertainty, and growing questions around the duration and visibility of AI-related spending have all contributed to a more cautious market backdrop. Yet despite these headwinds, earnings growth has remained remarkably strong and has been a driver of positive equity returns. Eaton Vance highlights the fundamental strength beneath the market. If geopolitical risks were to ease, investors could benefit from a second-order effect through lower interest rates and a lower discount rate applied to future cash flows.
Credit
A Tale of Two Markets: Strong Credit, Weak Alternatives
Credit has held up well so far this earnings season, whether looking at banks or consumer credit businesses. What has not held up nearly as well is the alternative asset manager space. As Bespoke highlights, an equal-weight basket of the six largest publicly traded private equity firms is now down roughly 45% from their highs. That is a steeper decline than the group's 2022 bear market drawdown and similar in magnitude to the selloff seen during the COVID shock. Investors have become more cautious toward the sector.
International Investing
Decoupling Direct Investment: American Firms’ Retreat from China
Corporate investment decisions offer a view of changing economic relationships beyond trade headlines. Federal Reserve researcher Cody Kallen finds a broad decline in American companies’ direct investment in China. Announced projects establishing new facilities or operations fell sharply in 2020 and remained subdued through 2025. Their share of broader investment activity declined as well.
Greenfield FDI stands for Greenfield Foreign Direct Investment, which occurs when a company expands into another country by building brand-new facilities, offices, or factories completely from scratch on undeveloped ground. The chart below shows the decline of investment into China.
The Boom Era (2003–2013): U.S. firms consistently launched ~300 to 400 new projects per year across the mainland, heavily concentrated in high-tech and advanced manufacturing.
The Structural Fissure (2020–Present): Following a gradual moderation in the late 2010s, new project announcements collapsed in 2020 and have not recovered. U.S. corporate sponsors are now initiating fewer than 60 projects annually—an ~85% drop from peak levels.
Broad-Based Retrenchment: The contraction is not limited to restricted semiconductor or sensitive dual-use tech sectors. It spans everyday industrial manufacturing and broad commercial services.
U.S. Greenfield FDI into China
Source: Cody Kallen, Federal Reserve FEDS Notes, Decoupling Direct Investment: American Firms’ Retreat from China, September 25, 2026, Figure 2, supplied PDF pp. 2–4. Chart: fDi Markets, 2003–2025, as of August 3, 2026. Project counts and shares, not investment dollar values.
Although the level of greenfield FDI declined worldwide in 2020, the dropoff in FDI between the U.S. and China was more severe and persistent than elsewhere. The second chart above shows that U.S.-to-China greenfield FDI projects also declined as a share of outward U.S. greenfield FDI and as a share of all greenfield FDI into China. The U.S. has become a less important source of investment into China, and China has become a less important destination for U.S. investment.
Labor
Fewer International Students, Broader Economic Consequences
A recent Richmond Fed report highlights a sharp decline in U.S. student visa issuance, raising concerns that extend beyond university enrollment. Roughly 27% of international students study computer science, information science and mathematics, compared with 6% of U.S. resident students. With international students disproportionately represented in STEM fields, declining enrollment threatens not only university tuition revenues but also the pipeline of skilled workers supporting U.S. technology and innovation. For the broader economy, a sustained decline could constrain high-skilled labor supply, slow business formation and weaken long-term productivity growth, particularly as investment in AI and advanced technologies continues to accelerate.
Economic Calendar: Week Ahead (Eastern Time)
Mon, 10/19 @ 10:00 am: NAHB Housing Market Index
Tues, 10/20 @ 8:30 am: Housing Starts
@ 10:00 am: Pending Home Sales Idx, M/M%
Thur, 10/22 @ 8:30 am: Weekly Jobless Claims
@ 10:00 am: Leading Indicators
@ 11:00 am: Kansas City Fed Survey
Fri, 10/23 @ 9:45 am: US Flash Manufacturing PMI
@ 9:45 am: US Flash Services PMI
@ 10:00 am: U. Michigan Final Consumer Survey
The Team Behind Friday Focus
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This article contains general information only. Sunflower Bank, N.A. is not, by means of this article, rendering accounting, financial, investment, legal, tax, or other professional advice or services. It is not meant as a substitute for such professional advice or services. Before making any decisions related to these matters, you should consult a qualified professional advisor. Investment and insurance products are not FDIC-insured, are not a deposit or other obligation of, or guaranteed by the bank or an affiliate of the bank, are not insured by any federal government agency and are subject to investment risks, including possible loss of the principal amount invested.
Investment advisory services are offered through First Foundation Advisors, an SEC-registered investment adviser. FirstSun Advisors is a tradename used by First Foundation Advisors as it works to integrate names following its merger into the FirstSun Capital Bancorp family of brands. Registration with the SEC does not imply a certain level of skill or training. Investments and insurance products are not FDIC-insured, are not a deposit or other obligation of, or guaranteed by the bank or an affiliate of the bank, are not insured by any federal government agency and are subject to investment risks, including possible loss of the principal amount invested. FirstSun Advisors is a wholly owned subsidiary of FirstSun Capital Bancorp.