Our positive early-year outlook, supported by a strengthening economic environment and improving corporate earnings, has certainly been tested by rising geopolitical tensions and an atmosphere of uncertainty. However, the strength of market returns reflects the widespread view that, although geopolitical risks remain high, economies are proving resilient in the face of a new energy price shock. Furthermore, strong corporate earnings have pushed many stock market indices to new all-time highs.
Figure 1: Inflation was moving in the right direction
Geopolitical risks related to the Middle East will continue to influence market trends. A key element of the outlook for the next six months remains the achievement of a peace agreement between the United States and Iran and the reopening of the Strait of Hormuz, whose prolonged blockade could have generated even more significant negative global consequences.
Assuming the situation resolves quickly enough to allow the restoration of most raw material production in the Gulf in the near future, the economic consequences should be limited. However, the impact on inflation data needs to be closely monitored, as it could influence interest rate trends, with central banks needing to assess whether and how decisively to respond to another wave of inflation.
Figure 2: History teaches that high oil prices equal weak growth
Overall, our view remains positive. We expect economic growth to continue on a positive trajectory, while earnings dynamics appear strong and increasingly broad-based across sectors and regions. Limited market leadership remains a risk, especially considering how the theme of artificial intelligence has driven gains in a relatively narrow group of companies, but the underlying earnings outlook is stronger than this situation suggests.
In this context, we continue to identify the most attractive return opportunities in equities compared to bonds, with a preference for emerging markets, Asia, and Japan. In summary, although geopolitical uncertainty may cause further volatility, resilient growth and solid corporate fundamentals should remain the dominant forces shaping market performance in the second half of 2026.
Figure 3: EPS growth forecasts by region
