The Big Picture: Second quarter 2026

Geopolitical tensions and the resulting energy shock have lifted volatility and pressured near-term growth and inflation expectations.

Even so, longer-term inflation remains anchored, and the move toward a more hawkish central bank outlook may be overstated. The US still looks relatively resilient, helped by policy support, deregulation, and tax relief.

Europe and the UK face greater exposure to energy prices and labor-market weakness, though German fiscal measures could help cushion the impact. In Asia, China’s recovery remains policy-led while Japan’s expansionary stance may push yields higher along the curve.

Credit markets continue to benefit from solid fundamentals, strong demand, and attractive yields. Select areas of structured credit and emerging markets also offer relative value for investors willing to navigate ongoing geopolitical risk.