The macroeconomic and geopolitical scenarios at the beginning of summer outline a perspective of moderate growth and high uncertainty, with markets suspended between still resilient fundamentals and downside risks that are progressively becoming more evident.
Although the global economy continues to expand, the pace of growth appears slower and more fragile, with estimates around 3% and signs of deceleration in most advanced economies. The resilience observed in the last 12–18 months, supported by fiscal stimulus and substantial investments related to AI, now appears increasingly uneven and dispersed, although, in the short term, the most likely dynamic is a progressive loss of cyclical momentum rather than a true recession.
While developed economies, particularly Europe, face weaker demand and negative impacts on trade, the US economy continues to show greater resilience, but growth increasingly concentrated on a few pillars, AI investments above all, makes the US cycle more exposed to adverse shocks.
Indicators derived from surveys also signal a deterioration in confidence, mainly linked to the impacts on energy markets from geopolitical turmoil and the risk of a more lasting impact on price dynamics.
The margin of error around the base scenario is therefore progressively narrowing. Central banks now explicitly recognize that geopolitical tensions are simultaneously generating inflationary pressures and weakening growth. What is more serious, inflationary risks, no longer limited to energy, foresee second-order effects on food and supply chains, threatening that inflation expectations may progressively become unanchored.
The macro regime would therefore tend to assume a stagflationary construct that does not yet seem to be reflected homogeneously and coherently across different investment asset classes.
Central banks are thus entering a decidedly complex phase which for markets inevitably implies less support from monetary policy and greater sensitivity to macroeconomic surprises. This while markets overall continue to show a certain degree of complacency regarding macro risks.
Specifically, equity markets remain supported by solid earnings growth, especially in sectors related to AI, which has given them a strong ability to absorb macro volatility. However, their valuations remain relatively high and reflect the dominant leadership of a limited number of stocks and themes.
On the other hand, credit markets continue to benefit from strong technical support, with compressed spreads signaling limited incorporation of downside risks, despite the progressive increase in macro uncertainty and an unfavorable convexity profile presented by more volatile segments of corporate bonds.
The main tension is therefore between still solid micro fundamentals and a macro outlook potentially deteriorating.
In the short and medium term, the main risk factors evidently continue to focus around some key areas:
- the geopolitical one, with risks associated with major trade routes.
- Inflation shocks driven by energy, forcing central banks into an even more vigorous restrictive stance.
- Negative surprises on growth, especially if consumption and investments weaken.
- Positioning risk, with crowded trades — from AI-related equity to credit with compressed spreads — vulnerable to sudden corrections.
The deterioration of the balance of concrete and perceived risks could therefore soon be fueled by weaker growth and higher inflation risks in the next 12 months. But in the base scenario, the summer outlook still seems to be one of some further market resilience accompanied by episodic volatility, which, once a more favorable risk premium is re-established, could offer valid buying opportunities.
Such a context therefore suggests maintaining a good level of diversification, including geographic, avoiding excessive concentrations and preserving flexibility.
The rate, a great uninvited guest and, so far, a strong determinant of market trends, could instead stabilize around what is currently priced in by markets. But here too, caution and gradualism are mandatory. The scenario of an adverse evolution of inflation is indeed the main tail risk scenario.
