MACROECONOMIC OUTLOOK
- The US Supreme Court ruling on February 20, 2026, abolishing “reciprocal” tariffs, and the Gulf War that began on February 28, 2026, are disrupting the spring investment strategy. Our global macro scenario for March is characterized by increased uncertainty due to US trade policy. The Trump administration’s management of tariffs is disrupting corporate visibility. However, strong employment, the investment cycle, and the midterm election campaign are supporting continued economic growth in 2026. After rising in January and February, oil prices surged to over 100$ on March 9th 2026.
- The rise in hydrocarbon prices, if temporary, is unlikely to drastically slow global economic growth. It remains buoyed by US consumption, the long-term investment cycle, public deficits, and the fluidity of corporate funding in developed countries. In the US, consumption remains robust. Non residential investment is also strong. The rise of the OBBBA is positive for the economy. The midterm election year is leading the Trump administration to pursue policies that support household purchasing power (credit card and mortgage rates for households, efforts to control healthcare costs). Overall, for 2026, US GDP is expected to grow by +2.5%, unemployment is expected to settle at 4.5% (structural changes linked to productivity gains: growth with less employment), and inflation in 2026 is expected to remain resilient at around 3% (tariffs, healthcare, electricity, gasoline). In Europe growth is picking up (1.5% in 2025) but is concentrated in a few sectors: aerospace, defense, tourism, infrastructure, and banking. Domestic demand is gradually taking over from international trade. Overall for 2026: GDP growth is expected to be +1.2%/1.3%, unemployment is expected to remain unchanged at around 6.5%, and inflation could exceed the ECB’s forecast of 1.9% if the conflict in Iran continues.
- Short-term interest rates are expected to remain stable in the Eurozone and Switzerland, compelled decrease in the United States from summer 2026 onwards, decline gradually in the United Kingdom, and rise gradually in Japan.
- The rise in long-term rates should be limited, driven by the deterioration in public finances against a backdrop of strong investment (defense, energy, information technology) demographic aging and key interest rates under political pressure to fall. The steepening trend has slowed since December 2025 (10-2 years US = 57 bps on February 27, 2026, compared with 70 bps on December 31, 2025), as Treasury issuances are focused on the short term. Corporate credit spreads remain very tight.
- Earnings growth should continue to be a driver for equities. As of February 27, 2026, S&P 500 Q4 2025 earnings are up 14.3% according to LSEG. Earnings growth expectations for the S&P 500 for 2026 are 15%.
- Sustained high oil prices would significantly reduce growth prospects.
ASSET ALLOCATION
In this context, our asset allocation and sector views are changing:
- Cash, provided it earns interest or waiting to be invested, offers a return that is just about equal to inflation, or at least equal to it, depending on the region.
- We maintain our favorable view on bonds given current yield levels, while favoring short and medium durations to partially hedge against the risk of a yield curve steepening and slight widening of credit spreads. Beyond that, our investment hierarchy remains broadly unchanged, we favor IG Corporate over HY and sovereign.
- We are adopting a neutral stance on equities pending a resolution of the situation in the Strait of Hormuz. We are underweighting emerging markets, which are more sensitive to the situation in the Middle East.
- Our sector views on equities are changing. The favorable scenario for banks is being partly called into question due to the rise in leveraged private credit risk in technology and the materialization of risk in the commercial real estate segment (mainly offices). We maintain our favorable view on aerospace and defense (commercial aircraft, rearmament, geopolitical tensions). In Japan, we favor export sensitive stocks that are benefiting from the weak yen. We also favor sectors that are benefiting from the stimulus plan (defense, energy, nuclear, etc.). The interest rate curve steepening in this region continues to boost financial stocks. The disruption of the technology sector by AI, with winners (semiconductors) and losers (software), continues. Oil majors are benefiting from a more favorable environment (pro-hydrocarbon US policy, positive refining margins, higher oil prices). US oil majors should benefit the most from the situation in the Middle East given their low exposure to this region.
- Finally, although the price of gold is volatile and below its peak, we maintain our favorable opinion of gold. It serves as a safe haven and partially replaces the dollar as a global reserve currency.
