MACROECONOMIC OUTLOOK
• Oil prices could remain high in 2026. The April macroeconomic scenario is marked by extreme uncertainty stemming from the conflict in the Middle East and U.S. trade policy. However, a strong labor market, momentum in the investment cycle, and the midterm election campaign are supporting economic growth in the United States.
• High oil prices and their negative impact on interest rates are likely to persist, undermining growth prospects in Asia, emerging markets, and Europe. However, this shock could be better absorbed thanks to the rise of electric energy, the bypassing of the Strait of Hormuz, and the relative decline in the Middle East’s share of global supply in favor of the Americas (the U.S., Latin America, and Canada).
• In the United States: GDP growth and the unemployment rate are projected at +2.3%/–2.5% and ~4.5%, respectively, while inflation exceeded 3.5% in April. Consumption remains robust, investment is strong, and the positive effects of the OBBBA are taking hold. The midterm election year, which typically supports household purchasing power, is favorable.
• In Europe: Growth is slowing compared to forecasts made at the start of the year. The ECB has revised its forecasts to 0.9% GDP growth and 2.6% inflation for 2026. The oil shock is compounding Europe’s loss of structural competitiveness relative to the rest of the world.
• Central Banks: Prospects for lower short-term rates are being called into question by the war in the Middle East. We expect a likely rate hike of up to 50 bps by the ECB by the end of 2026, no cut in the Fed Funds rate, stable rates from the SNB, a 25-bps rate hike by the BoE, and BoJ rates at 1%/1.25% in 2026.
• Long-term rates: We expect a modest rise, driven by the deterioration in public finances. There is no consensus among investors regarding the prospect of widespread price increases similar to those seen during previous energy shocks. The flattening of the yield curve stabilized in April; the US 10-year to 2-year spread stood at 48 bps as of May 13, 2026, compared to 68 bps at the end of 2025, while the German 10-year to 2-year spread was 40 bps as of May 13, 2026, compared to 73 bps at the end of 2025. Corporate credit spreads have reversed most of their year-to-date gains: European BBB spreads stood at 110 bps at the end of March 2026, 92 bps on May 12, 2026, and 89 bps at the end of 2025.
• Equities: Earnings growth is expected to remain a key driver for the stock market. The consensus EPS growth forecast for the S&P 500 was revised upward again in April to +24% for 2026, according to I/B/E/S LSEG as of May 8, 2026.
ASSET ALLOCATION
In this context, our asset allocation and sector views remain unchanged:
• We maintain a neutral stance on equities pending a resolution of the situation in the Strait of Hormuz. The sharp rise in oil prices is weighing on emerging markets, Asia, and Europe. The U.S. market is less sensitive to oil, and the S&P 500’s valuation has eased slightly overall, from 22x at the start of the year to 20.9x as of May 13, 2026, driven by strong Q1 2026 quarterly results. We continue to favor our equity exposure to U.S. markets.
• Bonds: We continue to favor short- to medium-term durations. We maintain a neutral stance on sovereign bonds, torn between their role as a safe-haven asset and the risk of an inflation premium. The yield curve is flattening. We maintain a neutral rating on corporate bonds in the U.S. and Europe, and an underweight rating for emerging markets, given the risk of widening spreads.
• Sector Views: We maintain our neutral stance on banks (leveraged private credit risk, commercial real estate). We maintain our positive bias toward aerospace and defense stocks, with a stronger focus on defense stocks, which should continue to benefit from restocking in the coming years We continue to observe a market divergence between the winners and losers of generative AI (semiconductors, software). However, the software sector has rebounded modestly on the stock market since late March/mid-April but remains 20% to 25% below its record high from late October 2025 The semiconductor sector (SOX Index) set a new record in May, rising by more than 60% year-to-date in USD. We continue to favor large-cap technology leaders in generative AI. We maintain our positive view on major oil companies. We also have a positive bias toward electric vehicle equipment manufacturers given the acceleration of electrification, as well as U.S. consumer staples stocks, which are benefiting from pressures on household purchasing power and the continued profitable growth of e-commerce.
• We are maintaining our exposure to gold following the price decline in Q1 2026, in anticipation of central bank rate hikes.
• USD: The war in the Gulf is allowing the dollar to temporarily regain its status as a safe-haven currency.
• Oil: Prices are expected to remain above $100 per barrel until the Strait of Hormuz is reopened.
