MACRO ECONOMIC OUTLOOK
• The global macro scenario for June is characterized by extreme uncertainty stemming from the conflict in the Middle East, but conversely by strong momentum in the investment cycle. A robust labor market, strong momentum in the investment cycle, and the midterm election campaign are supporting growth in the United States.
• High oil prices and their negative impact on interest rates are likely to persist, weakening growth prospects in Asia, emerging markets, and Europe. However, this shock could be better absorbed thanks to the rise of electric vehicles, the bypassing of the Strait of Hormuz, the relative decline of the Middle East’s share in global supply in favor of the Americas (U.S., Latin America, and Canada), and forced fuel-efficiency measures.
• In the United States: GDP growth and unemployment are projected at +2.3% and ~4.5%, with inflation approaching 4% as early as summer 2026 (gasoline, tariffs, healthcare, electricity). Consumption remains robust, investment is strong, and the positive effects of the OBBBA are materializing. The midterm election year, synonymous with support for household purchasing power, is favorable.
• In Europe: Growth is decelerating compared to forecasts from 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 compounds Europe’s loss of structural competitiveness relative to the rest of the world.
• Central Banks: Monetary policy is being called into question by the war in the Middle East. A 50-basis-point hike by the ECB is likely by the end of 2026. The Fed is not expected to cut the federal funds rate in June 2026, but the FOMC is adopting a hawkish stance. In Switzerland, stability is expected. In the UK, the next move is a 25-basis-point hike. In Japan, the increase is expected to be gradual, with the policy rate at 1%–1.25% in 2026.
• Long-term rates: We expect a modest rise, driven by the deterioration of public finances amid strong investment and widespread price increases. The flattening of the yield curve continued in May: the US 10-2 yield spread stood at 44 bps as of May 29, 2026, compared to 68 bps at the end of 2025; the German 10-2 yield spread was 40 bps as of May 29, 2026, compared to 73 bps at the end of 2025. Corporate credit spreads remain compressed: 4-year European BBB at 85 bps at the end of March 2026, 72 bps on May 29, 2026, and 89 bps at the end of 2025.
• Stocks: Earnings growth is a powerful driver of the stock market. In the United States, the outlook for earnings growth remains surprisingly robust. For 2026, S&P 500 earnings growth is projected at 25%, up from 15.6% at the start of the year.
ASSET ALLOCATION
In this context, our asset allocation and sector views changed modestly:
• Neutral stance on equities maintained, justified by the earnings momentum that investors had already well priced into stock valuation by May. The sharp rise in hydrocarbon 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 only slightly overall: 22x at the start of the year to 20.9x as of June 4, 2026, driven by strong Q1 2026 quarterly results. We continue to favor our equity exposure to U.S. markets, which offer high-quality assets that benefit from the digital economy.
• Bonds: We favor short duration. We maintain a neutral stance on government bonds. The yield curve is flattening. We maintain a neutral stance on corporate bonds for the U.S. and Europe and an underweight stance for emerging markets, given the risk of widening spreads.
• Sector Views: We maintain our neutral stance on banks due to the flattening yield curve, but Wall Street banks are benefiting from the market’s financial momentum (IPOs, M&A). We maintain our positive bias toward aerospace and defense stocks, with a stronger bias toward 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. IBM and Microsoft are among the most resilient. The semiconductor sector (SOX Index) set a new record in May, rising more than 96% year-to-date in USD, with half of that gain occurring in May 2026. We continue to favor large-cap technology leaders in generative AI. We maintain our positive view on the major oil companies. In the stock market, their performance is volatile depending on news regarding the ceasefire in the Gulf. We also have a positive bias toward electrical equipment manufacturers, as well as U.S. consumer retail stocks, which are benefiting from pressures on household purchasing power and the continued profitable growth of e-commerce.
• We are reducing our exposure to gold to neutral. Rising interest rates are weighing on the metal.
• USD: It is benefiting from its status as a safe-haven asset and expectations of a hawkish stance from the FOMC.
• We are reducing our oil exposure to neutral: Prices will remain around $100 per barrel until the Strait of Hormuz is reopened.
