Perspctives: "Mastering complexity, creating clarity"
Geopolitical tensions have noticeably shaped the financial markets in recent months. In particular, the war in the Middle East has not only caused great human suffering, but has also fuelled uncertainty worldwide – with a direct impact on the market environment. Stock prices were volatile, bond markets were under pressure, yields rose and oil prices also fluctuated significantly and trended upwards since the outbreak of the conflict.
Despite this challenging environment, the economic environment and the prospects of many companies remain constructive overall. For long-term investors, this creates a picture that leaves room for cautious optimism – especially with regard to the second half of the year.
Our half-year outlook is therefore created in an area of tension between geopolitical risks and at the same time solid fundamental prospects.
Investing with a view to the future
Despite the geopolitical upheavals, many stock markets have recovered quickly from the slump that followed the outbreak of the conflict. The S&P 500 and the Nasdaq were even able to reach new highs. Against this background, it seems understandable that many investors are wondering how this positive market sentiment can be reconciled with the still fragile geopolitical situation.
In fact, this apparent ambivalence is nothing unusual. Financial markets naturally look ahead and reflect less the current situation and more the expectations for the coming months. Our outlook for the second half of 2026 follows the same principle.
Every investment decision is based on assumptions – especially economic scenarios. The development of oil prices plays a central role in this. Since the beginning of the conflict, these have risen significantly, mainly due to concerns about possible supply disruptions. The Strait of Hormuz remains a critical bottleneck, as does potential damage to the energy infrastructure in the Gulf region.
Rising oil prices have a pro-inflationary effect. Against this backdrop, we already adjusted our inflation expectations upwards at the end of March and revised our growth forecasts moderately downwards.
Positive economic and business outlook
We continue to expect the energy price shock to have a primary impact on inflation, while growth momentum remains largely intact. In our baseline scenario, we assume continued solid global economic growth.
The economic stimulus is broad-based: In Europe, fiscal measures in particular are having a supportive effect. Government investment programmes in infrastructure and defence are strengthening the domestic economy.
In the USA, economic momentum also remains robust. The main drivers are extensive investments in future technologies, especially in the field of artificial intelligence. In addition, additional fiscal stimulus could be provided in the run-up to the congressional elections in November to stabilise economic development and cushion political risks.
A constructive picture is also emerging in the emerging markets. Export-oriented economies – especially in the technology sector – are benefiting from the continued high global demand for semiconductors and electronic components. This ensures a stable basis for growth and supports external demand.
At the company level, the starting position remains favourable. Profit margins are at historically high levels, especially in the USA. For the next twelve months, we expect double-digit earnings growth in the major economic regions, driven by resilient demand and high pricing power.
In our view, the macroeconomic environment remains supportive for risky assets. Nevertheless, geopolitical uncertainty has increased and forecast reliability has been reduced. Against this backdrop, we pursue a balanced investment approach that takes advantage of attractive growth opportunities while taking into account the increased risks in portfolio allocation.
“"The course of a conflict such as the current one in the Persian Gulf eludes reliable forecasts. This is precisely why it is important to master complexity and create clarity about the decisive trends."”
Johanna Handte, Chief Investment Officer
What are the opportunities?
After the pronounced market rally in April, we have reduced our equity allocation to a neutral position. As uncertainties continue to rise, we are waiting for clearer signals before raising our view on equities again.
Within the equity markets, we continue to focus on the region. We favor emerging markets over developed markets, supported by robust export momentum and structural growth potential. Within developed markets, we see U.S. equities at an advantage relative to European markets, particularly due to stronger innovation momentum and more resilient earnings performance.
At the sector level, our focus is on cyclical and growth-oriented areas. The industrial sector benefits from extensive government investment programs in infrastructure and defense. In addition, we again overweighted the IT sector at the end of April, as the semiconductor segment in particular continues to be strongly driven by the structural growth trend around artificial intelligence.
We currently rate bonds neutrally. However, the recent rise in yields has significantly improved the attractiveness of this asset class. We see interesting opportunities in the high-quality bond segment in particular, as they are now offering yields above savings accounts again.
For diversification, we maintain a strategic allocation to gold. In our view, ongoing geopolitical uncertainties and structural demand factors argue for longer-term support for the gold price.What are the risks?
The central risk to our outlook remains a renewed escalation of the geopolitical conflict between the US/Israel and Iran and a failure of diplomatic solutions. Even if there are always signs of an easing, a resurgence of tensions or a longer-than-expected disruption of the energy supply cannot be ruled out.
Such a scenario would have consequences on the inflation side in particular. Rising energy prices could further fuel inflation, especially through possible second-round effects. Persistently higher inflation would limit central banks' room for manoeuvre and potentially lead to further rising interest rates – an environment that would be particularly burdensome for bond markets.
In addition to geopolitical risks, structural uncertainties in the technology sector are also increasingly coming into focus. The rapid progress in the field of artificial intelligence is associated with high expectations that could prove to be overly optimistic. If technological development slows down or economic potential falls short of forecasts, there is a risk that the current large investments will not generate the expected returns.
Mastering complexity, creating clarity
The further development of geopolitical tensions remains difficult to predict. Whether and to what extent the existing conflicts will be defused in the coming months eludes reliable forecasts. The fundamental picture, on the other hand, is clearer: the economic conditions and the outlook for corporate profits remain fundamentally solid.
Against this backdrop, we believe a balanced investment approach is appropriate. In our view, a neutral allocation between equities and bonds offers an attractive balance between opportunities and risks. In addition, a strategic addition of gold can contribute to further diversification and hedge the portfolio against geopolitical imponderables.
All in all, we see a reliable basis for an optimistic view of the second half of the year.
