1. Volatile Energy Markets: The recent US-Iran interim agreement offers welcome relief, with the prospective re-opening of the Strait of Hormuz expected to gradually unlock oil and gas supplies. However, expectations should be tempered. Supply resumption will be slow due to damaged infrastructure and logistical complexities, taking weeks or even years for certain facilities to reach full capacity. Furthermore, nations rebuilding depleted strategic reserves will maintain demand-side pressure. The net effect is a softening of energy prices, but not a return to pre-crisis levels.
2. Equity Supply Dynamics: A substantial US Initial Public Offering (IPO) pipeline presents an underappreciated risk of short-term oversupply. Structurally, this could reverse the long-running trend of declining equity floats that has historically underpinned price appreciation. While recent orderly IPO completions set an encouraging precedent, the sheer scale of the upcoming pipeline could trigger a temporary liquidity crunch.
3. Investor Positioning: Relatively optimistic sentiment leaves markets vulnerable to near-term pullbacks. This is not a reason to reduce equity exposure, as short-term models remain constructive, and temporary weakness should be viewed as a buying opportunity. However, it demands discipline and a counter-cyclical approach rather than chasing momentum.
4. Central Bank Policy: Easing energy prices should alleviate tightening pressures on most central banks, supporting risky assets. However, institutions like the US Federal Reserve must balance this relief against a structurally tight US labour market. While monetary policy should remain supportive enough to avoid a significant spike in bond yields, intermittent inflation anxieties will likely surface.
Strategic Asset Allocation for H2 2026:
Despite these macro transitions, the investment case remains constructive. Navigating H2 successfully requires shifting away from coasting on H1 momentum towards disciplined positioning across asset classes:
Global Equities: We maintain an Overweight stance, with the US remaining our preferred market. However, broadening exposure beyond narrow tech segments like semiconductors is now crucial to ensure the sustainability of the rally.
Asia ex-Japan (AxJ): We have upgraded this region to Overweight, holding India, China, and Taiwan as our top regional convictions. These markets stand to benefit disproportionately from the moderation in oil price risks.
Bonds and Fixed Income: Fixed income offers an attractive opportunity to lock in yields at current levels, and we expect the US 10-year yield to ease modestly into the 4.25–4.50 per cent range over the next 12 months. Within this asset class, EM USD-denominated government bonds remain preferred for their attractive yields, limited commodity sensitivity, and lack of direct EM currency risk.
Gold: We retain an Overweight view on gold. It continues to serve as an effective hedge against stagflation and tail risks, structurally supported by ongoing, long-term diversification demand from emerging market central banks.
(The author is Chief Investment Officer for Africa, Middle East and Europe at Standard Chartered Bank’s Wealth Solutions unit)
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