A well-earned breather
Investment Update - July 2026
After two months of remarkable performance on equity markets, global indices posted more modest gains (+1,25%*).
Having benefited from a strong trend in Tech and AI on US and emerging markets between April and May, investors favoured the European markets: they posted a performance of 3,05%* at the end of June. Meanwhile, the US markets posted a performance of only 1,31%* and emerging markets were only marginally positive (+0,86%*).
The easing of the conflict in Iran, along with the conflicting news surrounding hopes for a resolution, was likely one of the most favourable developments of the past month. The truce brought Brent crude down by 20%, ending the month at USD 72. As traffic through the Strait of Hormuz partially resumed, the premium on oil premium, compared with February's level, gradually unwound throughout June.
This easing of pressure on oil also relieved tension in the bond market, with sovereign yields edging slightly lower. After trading at 4,70% in May, the US 10-year yield closed just below 4,50%. Similarly, the German 10-year rate, which had reached 3,20% in May, ended June at 2,90%.
The European Central Bank (ECB) demonstrated its sensitivity to inflation and raised its key rates by 25 basis points. Its deposit rate now stands at 2,25%. It should be noted, however, that the recent easing in oil prices calls into question the need for a second rate hike, which is generally expected to follow the first. Indeed, preliminary June inflation figures are already showing an improvement: annual inflation came in at 2,8% (-0,4 percentage points versus May), with core inflation improving significantly to 2,4% from 2,6% in May.
In the United States, the change of leadership at the Federal Reserve (Fed) has brought its share of uncertainty. At his first FOMC meeting, new Chair Kevin Warsh was reserved, indicating that the Fed would communicate less about its future moves in an effort to “clean up” its relationship with the markets. The Fed will aim not only to be less voluble, but also to be slightly more hawkish on inflation, with Warsh expressing discomfort that inflation has remained above target for “too long”. Fortunately, the recent decline in inflation expectations has not led markets to price in an aggressive response, with only one rate hike expected in the coming months.
With fears of stagflation receding, the economic backdrop is improving. Thus, the overall allocation remains favourable to risk, with equities overweight at the expense of bonds. In June, the gradual fading of stagflation risks that had weighed on Europe triggered a rally in European equities, particularly in industrials and financials. On the other hand, emerging markets, overly concentrated in just three companies, were moved from overweight to neutral.
From a sector perspective, profit-taking on the AI theme led to a neutralisation of positions in Technology. In addition, cyclicality continues to be sought out via sectors such as Industrials and Banks. Finally, a preference for Biotechnology remains in place within the portfolios. Geographically, neutrality has been maintained across regions. Following the improvement in economic prospects in Europe, positioning on the region had already moved from underweight to neutral in May. In the United States, profit-taking following solid performances has moved positioning from overweight to neutral, in line with emerging markets, whose positioning had likewise been shifted to neutral.
On the fixed income side, duration remains contained, with a continued preference for credit over sovereign bonds.
*Performances are calculated in euros.
Stock markets
In June, equity markets continued to rise despite an uncertain geopolitical environment. The MSCI Europe posted the best performance among the major regions (+3,05%*), ahead of Japan (+1,87%*) and North America (+1,31%*), while emerging markets rose more modestly (+0,86%*). China was the exception: it lost 4,96%*, weighed down by persistent concerns over domestic demand.
Investors remained focused on developments in the Middle East conflict, with the signing of the memorandum of understanding between the United States and Iran fuelling hopes of a gradual reopening of the Strait of Hormuz. At the same time, central banks maintained a firm tone in the face of persistently high inflation, leading markets to anticipate more hawkish monetary tightening in both the United States and Europe. Despite this backdrop, CEOs at the annual leadership conference delivered a broadly reassuring message, highlighting continued robust demand in the United States, a strong ability to pass on inflation through prices, and sustained investment in artificial intelligence and data centre infrastructure.
From a sector perspective, travel, insurance, healthcare and banking stocks were the most sought-after, while energy suffered from the decline in oil prices during the month. Technology stocks continued to be supported by AI momentum, although very strong recent performance has led to some profit-taking.
In the portfolios, profits were taken on emerging markets and Technology, following their strong growth. While the long-term outlook for AI remains favourable, a consolidation phase seems possible before the next earnings season. At the same time, exposure to Energy was increased, particularly in oil services companies, whose investment outlook is still strong under a scenario where oil prices are expected to remain higher than before the conflict. This allocation could be increased further in the event of a correction driven by geopolitical de-escalation. Finally, exposure to small and mid caps was increased to take advantage of the expected broadening of earnings growth, still-favourable macroeconomic conditions in the United States, and the potential for a rebound in valuations in Europe.
*Performances are calculated in euros
Sovereign yields and credit market
In June, central banks once again took centre stage, remaining highly attentive to the inflationary pressures caused by the conflict in the Middle East. Bond markets oscillated between fears of monetary tightening fuelled by more hawkish statements from the Fed and the ECB, and the easing allowed in the second half of the month, with oil prices down following the agreement reached between the United States and Iran.
Across the Atlantic, ongoing tensions in the Middle East, robust employment figures and an increasingly restrictive Fed initially pushed sovereign yields higher. Kevin Warsh's first meeting as Fed Chair made a lasting impression: although policy rates remained unchanged, the Fed's rhetoric revived expectations of a rate hike, pushing the 2-year US yield sharply higher. However, the easing of oil prices and slightly more favourable inflation figures in the second half of the month helped limit the rise in long-term yields: the US 10-year ended June at around 4,46%, down by around 3bp over the month.
In the eurozone, the ECB delivered its first rate hike since 2023 on 11 June, taking its deposit rate to 2,25%. While the decision was widely expected, Christine Lagarde maintained a firm tone, while suggesting that the pace of tightening could remain moderate. As in the United States, the fall in oil prices following the agreement with Iran subsequently supported a notable easing in inflation expectations. The 10-year Bund thus ended June at 2,85%, down 8bp over the month.
In the credit segment, movements remained limited. In the United States, Investment Grade spreads widened by 3bp to 76bp, while High Yield also widened by 3bp to 275bp. In the eurozone, spreads remained broadly stable, widening only slightly over the month. This reflects the resilience of credit despite the volatility linked to the Middle East conflict and the shift in tone from central banks.
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