Mid-year outlook

The first half of 2026 has reinforced our view that this is not a standard late-cycle environment. Growth is slowing unevenly, inflation risk is rising, and fiscal policy is becoming a more visible constraint. Geopolitical shocks are increasingly affecting energy prices, shipping routes, food and fertiliser costs, and corporate margins, while artificial intelligence (AI) continues to be a strong earnings driver across regions and, increasingly, across sectors. The next six months will test the endurance of our scenario, which assumes a fragile de-escalation of the Middle East crisis and a reopening of the Strait of Hormuz, although the path to a stable deal remains uncertain.

Four key themes will be particularly important for investors: 

• the resilience of the global economy to the energy shock, 
• the credibility of policy response in a world of higher debt and constrained central banks, 
• the political implications of the US mid-term elections as markets start to price the next phase of fiscal and regulatory choices 
• the continued broadening of the AI supercycle.

This environment calls for exploring opportunities, but with a growing focus on expanding the protection toolkit. In our view, the main risk is the lagging market recognition that the policy cushion is thinner than in previous cycles. Therefore, central banks’ actions will be important to watch. The Fed is likely to remain on hold for an extended period, constrained by inflation uncertainty and the need to preserve credibility, while the ECB and the BoE have turned more hawkish than previously expected, amid higher inflation pressures. Since investors cannot rely on a dovish pivot to support all asset classes, portfolios should be built to withstand the current uncertain macro backdrop, while also incorporating exposure to strategic long-term growth stories. 

As we move into a resilient but more inflationary regime, asset allocation should be less focused on market directionality and more on selective opportunities:

How much can economies and markets endure?

Macro and financial market endurance relies on the assumption of a fragile de-escalation of the Middle East conflict and AI supercycle. Any negative surprise can exacerbate existing vulnerabilities (high debt, concentration, leverage).

DOWNSIDE SCENARIO

Re-escalation, failed deal implementation, or an AI hard landing

Macro/financial shock and global recession risk

Oil moves far above assumptions; inflation expectations become less anchored, pushing central banks to hike further in 2026 and/or disappointment in AI/tech leads to a market correction.

Market implications

Risk-off pivot; lower quality credit under pressure, high premia on govies with scarce fiscal discipline. Favour cash, short-term rates in the US and safe-haven currencies (CHF, USD).

MAIN SCENARIO

Fragile de-escalation, broadening of AI adoption

Energy risk repriced, recession avoided

Oil higher than previously assumed but no significant spike. Growth revised lower (notably Europe) but no recession. Cautious central banks; hikes possible but do not expect a full hiking cycle.

Market implications

Stay risk-on, with protection: strong EPS growth, decent liquidity. Selective on Europe, Asia, real assets, commodities insurance.

UPSIDE SCENARIO

Credible settlement and clearer Strait reopening, AI virtuous cycle

De-escalation, disinflation and rising confidence

Normal in/outbound Strait of Hormuz traffic, paving the way for clearer easing cycle for central banks.

Market implications

Increase risk exposure. Favour cyclicals, Europe, EM assets, Asia and energy importers; bonds supported as inflation fears ease.

With downside and upside risks both elevated, diversification is key. This calls for moving away from a traditional 60/40 equity-bond allocation towards a diversified stance, including gold, commodities and private assets, as well as exposure to structural themes in Europe and emerging markets.

Adjust to the yield reset

Higher yields have made bonds more appealing, but with debt high and policy paths unclear, flexibility is key to capturing bond income.

Sources: Amundi Investment Institute, LSEG Datastream • Data as of 25 June 2026.

Seek breadth, avoid concentration

AI remains a structural equity driver, but avoiding concentration risk will be key. Look to a broader opportunity set from infra providers to AI adopters across sectors and regions.

Sources: Amundi Investment Institute, analysis based on proprietary baskets comprised of a diversified set of stocks with characteristics belonging to the specific AI segments and location of the business. Data rebased to 100 at 1 January 2024. Data as of 31 May 2026.

Invest in Europe’s capex revival

Europe’s strategic autonomy agenda is becoming a multi-year investment cycle across defence, energy security, AI infrastructure and industrial renewal.

Sources: Amundi Investment Institute, NATO, Bloomberg Economics Forecasts • Defence spending as a percentage of GDP is a weighted average. Data as of February 2026.

Rethink the traditional hedge

Higher inflation, geopolitical volatility and USD debasement are key risks. Duration alone is not enough. A broad protection toolkit includes gold, FX, alternative investments, and hedging strategies.

Sources: Amundi Investment Institute, Bloomberg • The equity index refers to the S&P 500, and the bond index refers to the Bloomberg US Treasury Index. Correlation is based on a 12-month rolling window. Monthly data as of April 2026.

Back real assets in an era of inflation

Increase focus on the real economy, real assets, commodities, and infrastructure as stores of value at a time of higher risk of value erosion from inflation.

Sources: Amundi Investment Institute, Bloomberg. • Data as of 15 June 2026. For illustrative purposes.

Diverging opportunities across EM

Favour countries that are supply-chain winners, commodity exporters, or those with credible policy frameworks. Be cautious where dollar sensitivity is high and external balances are weak.

Sources: Amundi Investment Institute, LSEG Datastream • Data as of 23 June 2026.

Asset Class Views

Source: Amundi Investment Institute • Summary of views expressed at the most recent global investment committee (GIC) and updated as of 17 June 2026. The table shows absolute views on each asset class and are expressed on a 9 scale range. This material represents an assessment of the market at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research, investment advice or a recommendation regarding any fund or any security in particular. This information is strictly for illustrative and educational purposes and is subject to change. This information does not represent the actual current, past or future asset allocation or portfolio of any Amundi product. FX table shows absolute FX views of the GIC.