Dear readers,
Despite the geopolitical turmoil, the global economy proved to be robust overall in the first half of 2026. Driven by a solid global economic trajectory, supportive monetary and fiscal policies, and the AI boom, the upward trend in the stock markets was able to continue for the most part following the price surge of 2025, even though volatility – especially beneath the surface – has clearly increased. The US benefited from strong growth and robust AI momentum, while higher energy costs, sluggish growth, and weaker earnings momentum were weighing on Europe. Alongside US stocks, other AI beneficiaries – such as South Korea and Taiwan – were among the clear winners of the first half of 2026, whereas government bonds, and precious metals struggled due to rising expectations for policy rates and long-term yields in the wake of the Iran War.
Against this backdrop, our base-case scenario for the second half of the year remains cautiously optimistic. Whilst economic, inflationary and geopolitical risks remain present even after the end of the war in Iran due to energy prices that are still elevated, they may even intensify in the run-up to the US mid-term elections and amid rising IPO activity. At the same time, however, globally expansionary fiscal policy, robust corporate earnings, ample liquidity and the secular growth driver of AI are supporting the markets. As long as neither a significant tightening of US monetary policy nor a recession is on the horizon, we see no reason to strategically underweight equities. We consider both scenarios unlikely, at least in the short term.
Accordingly, we are continuing to maintain a moderate overweight position in equities, with a preference for the US, selected emerging markets and AI beneficiaries, supplemented by selective value sectors such as banks and commodity stocks. In our view, precious metals remain an important portfolio component despite their recent correction, as higher government debt and structurally higher inflation underpin the case for tangible assets.
With the end of the Iran War, macroeconomic headwinds are also likely to gradually ease once more. We remain underweight in government bonds – particularly in the core segment – in view of rising new issues, weaker diversification characteristics and increasing competition from the financing of major AI investments. We regard corporate bonds as relatively more attractive than government bonds, despite the narrow risk premiums. Our primary focus here is on capturing yield premiums. We are deliberately maintaining a higher cash position as ‘dry powder’ in order to tactically capitalise on any potential pullbacks and periods of heightened volatility as the year progresses.
In the Insights interview Javier Garcia Laparra, Lead Portfolio Manager of the Berenberg Emerging Asia Focus Fund, discusses opportunities in Asia including those outside the AI sector in more detail.
We hope you enjoy the read and wish you a relaxing summer.
Publisher
Ulrich Urbahn
Ulrich Urbahn is a CFA charterholder and, for many years, was part of one of the world’s top three multi-asset research teams in the renowned Extel survey. After earning degrees in economics and mathematics from Heidelberg University, he spent more than ten years at Commerzbank, where he worked, among other roles, as a Senior Cross-Asset Strategist. He has been with Berenberg since October 2017 and heads the Multi Asset Strategy & Research as well as the Portfolio Management Alternatives departments. In addition, he is a voting member of the Investment Committee and is responsible for capital markets communication.