Power of endurance
The global economy is at an inflection point. We see growth slowing unevenly and fiscal policy becoming a more visible constraint. Meanwhile, inflation risks are rising as geopolitical shocks increasingly affect energy prices, food and fertiliser costs, and shipping routes. Still, artificial intelligence (AI) remains a strong earnings driver across regions and, increasingly, across sectors.
The next six months will test the endurance of our central scenario, which assumes a fragile de-escalation of the Middle East crisis and a reopening of the Strait of Hormuz, even if a stable deal remains uncertain. In this scenario, energy risks will be repriced, a recession avoided, and central banks will not embark on a full hiking cycle.
But the scale of uncertainty means we also explore the investment implications of alternative scenarios. A more adverse one incorporates the risks of a macro/financial shock and global recession. Meanwhile, a more benign alternative assumes a full normalisation of the Strait that paves the way for monetary easing.
Four key themes will determine whether markets pass the endurance test:
- the global economy’s resilience to the energy shock
- the credibility of policymaking in a world of higher debt and constrained central banks
- the political implications of the US mid-term elections as markets start to price the next phase of fiscal and regulatory choices
- the continued broadening of the AI supercycle.
Portfolios that incorporate exposure to strategic long-term growth stories, such as a revival in European capital expenditure, should also be built to withstand a range of outcomes. In our view, a key risk is that the market may not have fully integrated policymakers’ reduced room for manoeuvre compared with previous cycles. Investors cannot rely on a dovish central bank pivot to support all asset classes.
The investment themes in this Outlook therefore highlight an expanded range of hedging strategies. They also underscore the importance of avoiding equity market concentration risks while focusing on adopting a more diversified allocation. As the global economy moves into a resilient but more inflationary regime, asset allocation should focus less on market directionality and more on selective opportunities.
Monica DEFEND
Building portfolios for a world where money is political, inflation is more volatile, and concentration is more expensive will be key. In this new regime, the best portfolios can withstand different scenarios: they need to be diversified across currencies, invested in real assets and gold, and explore equity sector opportunities and structural themes.
H2 2026 Scenarios
H2 2026 Scenarios
Vincent MORTIER
As the AI story shifts from who can build the frontier to who can scale it, investing will be about seeking breadth across the full value chain and diversifying against technological, geopolitical and physical risks.
Key convictions for 2026
H2 2026 Investment themes
Higher yields have made bonds more appealing, but with debt high and policy paths unclear, flexibility is key to capturing bond income.
AI remains a structural equity driver, but avoiding concentration risk will be key. Look to a broader opportunity set from infra providers to AI adopters across sectors and regions.
Europe’s strategic autonomy agenda is becoming a multi-year investment cycle across defence, energy security, AI infrastructure and industrial renewal.
Higher inflation, geopolitical volatility and USD debasement are key risks. Duration alone is not enough. A broad protection toolkit includes gold, FX, alternative investments, and hedging strategies.
Increase focus on the real economy, real assets, commodities, and infrastructure as stores of value at a time of higher risk of value erosion from inflation.
Favour countries that are supply-chain winners, commodity exporters, or those with credible policy frameworks. Be cautious where dollar sensitivity is high and external balances are weak.
Philippe D'ORGEVAL
Europe’s long-term opportunities outweigh the short-term challenges. Defence and security spending, alongside investment in electrification and AI infrastructure, are clear areas of momentum as Europe pivots towards strategic autonomy. Private markets are also seeing substantial capital flows, marking another long-term growth story.
Asset Class Views
Asset Class Views
Editors
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Claudia BERTINO | Laura FIOROT | Swaha PATTANAIK |