1. April marked a surprising risk asset recovery: stocks and high yield credit have rebounded since end-March, with the US and Emerging Markets hitting new all-time highs on the back of a strong Q1 earnings season. We remain Neutral on Equities, pending confirmation of the reopening of the Strait of Hormuz
2. Weaker growth and higher inflation outlook: even if Gulf energy exports resume soon, the global economy will still lack around 1 billion barrels of oil (10 days of global consumption). Weaker 2026 GDP growth and higher inflation will result from this supply disruption, particularly in Europe and Asia.
3. A challenging environment for central banks: this lower growth and higher inflation scenario is a difficult challenge for central banks. The US Federal Reserve should stay on hold. Given our anticipation of a gradual recovery in energy exports from the Gulf, we also expect the ECB to stay on hold at its June meeting.
4. Energy security at the top of the agenda: the 50% increase in the crude oil price underlines the need for greater energy security in Europe and Asia. This, in turn, drives investment both in nuclear and renewable energy, and in energy infrastructure. Favour electricity and Europe infrastructure, battery ETFs and funds.
5. Industrial metals head towards 2022 highs: driven by a combination of the electrification theme and Iran conflict-related supply disruptions, copper, aluminium and nickel maintain strong momentum in 2026. Favour energy & metals commodity ETFs and funds, and resource sector stocks and ETFs.
Edmund ShingÂ
Chief Investment Officer
