The global economy is adjusting to the energy shock, though its impact is fading without further escalation, and real growth has held up despite a sharp rise in the oil price. Growth is supported by a surge in investment spending in defence, supply chains, the energy transition, and artificial intelligence (AI) infrastructure.

This shift towards higher capital spending, partly financed by increased government bond issuance, is moving the global economy from the excess savings that characterised the past two decades to greater capital scarcity – what our economists refer to as a shift from a savings ‘glut’ to a savings ‘grab’. This, in turn, structurally reduces downward pressure on benchmark bond yields while keeping inflationary pressures alive.

Where to invest for the rest of 2026? Our key calls

Equities

We have a constructive global stance on equities. Strong earnings and AI momentum support US equities, while Asia – China and Japan, specifically – forms an integral part of the AI value chain. India remains attractive with longer-term upside, and Singapore and Switzerland offer defensive strength. We now also favour Spain and Italy over Germany and France due to their exposure to banks and electrification-linked utilities. In terms of sectors, communications provides a mix of AI-driven growth and resilient cash flows, and we also see value in selective financials and healthcare. As for thematic investing, we favour industries linked to higher investment spending, including clean energy and traditional infrastructure.

Fixed income

Well-anchored inflation expectations and likely lower oil prices should support the asset class, while current yield levels provide a meaningful cushion for total returns against higher interest rates. This leads us to adopt an overweight duration stance, although with a tactical tilt. We focus on corporate investment-grade bonds and see diversification benefits in GBP-denominated debt. We also favour emerging market (EM) bonds, both in hard currency as part of a core allocation and in local currency, given their attractive real yields. Higher risk appetites can be sated by selective opportunities in quality names via subordinated debt, which carries a higher loss-absorption risk due to its junior position in the capital structure, and/or high-yield issuers, which offer a higher credit risk premium.

Currencies

The USD is currently supported by safe-haven demand, market-based expectations of interest rate hikes, the AI investment boom, and the US’s net oil exporter status, but current account outflows and an unsustainable fiscal position potentially point to renewed downside. The EUR may benefit despite Europe’s growth and energy challenges. We also favour the AUD and the NOK thanks to their yield, commodity support, and tighter monetary policies from their respective central banks. The GBP also offers an attractive yield, but fiscal risks and political uncertainty weigh on sentiment. As for EMs, Latin American currencies offer attractive carry, though fiscal risks remain.

Precious metals

We have a preference for gold, which remains supported by structural central bank demand and safe-haven buying. Silver, on the other hand, is richly priced after its two-year rally and warrants a cautious stance.

Alternative investments

Private markets are slowing amid higher interest rates and valuation uncertainty. Thus, manager selection remains critical. In private equity, we favour managers with strong execution and operational value creation. Private debt, especially European direct lending, remains attractive for its yield, diversification potential, and floating-rate exposure. Infrastructure potentially offers resilience and inflation-linked cash flows, supported by structural trends from AI to clean energy. In hedge funds, multi-strategy and low-volatility strategies could help preserve capital and provide diversification.

Frequently asked questions

How will oil prices shape inflation and rates from here?

Oil price movements still influence inflation and keep central banks cautious, but they pose less of a threat to growth than in the past. This is reflected in the reduced oil intensity of the global economy, which is increasingly driven by electrification and greater efficiency. Prices would need to rise significantly further to materially harm economic activity. In short, higher oil prices may have undone the expectations of interest rate cuts, but they are unlikely to trigger a recession – unless a full-scale oil crisis occurs, which is not our base case.

Is the USD debasement narrative still valid, and what could drive it going forward?

We do not see a deliberate US strategy to debase the USD – on the contrary, the US has an interest in preserving the USD’s reserve currency status. Furthermore, higher oil prices following the outbreak of the Iran war support the USD, with the US having shifted from being a net importer to a net exporter of energy. In our view, the USD is more likely to weaken gradually due to structural imbalances and diversification into other currencies.

What is the outlook for key currencies such as the JPY, CNY, and CHF?

The Bank of Japan’s slow rate normalisation offers only moderate upside for the JPY, while the authorities are prepared to act decisively against any further depreciation. The CNY, for its part, is undervalued and serves as a regional anchor while the People’s Bank of China manages the pace of appreciation. Finally, the CHF remains strong but is held back by interventions from the Swiss National Bank.

Is the commodity supercycle still intact?

Commodities are in the middle of a supershock rather than a supercycle, as lasting supply constraints, strong demand growth, and broad cost pressures are largely absent. Remarkably, the energy industry has proven to be highly innovative in coping with the shock caused by the Iran war. Nevertheless, periodic external shocks and economic cycles are bound to keep the asset class volatile.

Given gold’s muted performance as a safe haven amid recent geopolitical tensions, does it still make sense to allocate to precious metals today?

Among the precious metals, gold is in focus. It may seem counterintuitive, but gold prices often fall when the USD strengthens during geopolitical shocks. The Iran war has been no exception – especially as gold had become a crowded trade. Over the longer term, gold’s fundamentals remain supportive.