The main points of the allocation meeting on July 1, 2026
We slightly reduced our overweight in emerging market equities in portfolios where the relative overweight had become particularly large. However, we remain overweight, as our view on emerging market equities continues to be positive. Emerging market equities have delivered strong gains this year, driven primarily by semiconductor companies, with the MSCI EM Index returning more than 25% in euro terms year-to-date. Earnings growth in emerging markets is expected to reach an exceptional 60% this year, largely supported by South Korean technology companies. The ongoing AI investment boom, strong earnings growth, and valuations that are still attractive continue to support the outlook for emerging market equities, and we believe they offer attractive return potential over the next 6–12 months.
Oil prices have fallen back to their pre-war levels, with Brent crude trading at around $73 per barrel. However, US gasoline prices remain around 30% higher than before the conflict, at approximately $4 per gallon. The United States and Iran exchanged strikes on each other's military targets over the weekend but have since agreed to halt hostilities. The two sides met in Qatar yesterday to discuss the situation in the Strait of Hormuz, although no agreement has yet been reached on security arrangements or responsibility for monitoring maritime traffic. Shipping through the Strait has recovered significantly but has not yet returned to pre-war levels. Prediction market Polymarket currently assigns roughly a 30% probability that shipping traffic will fully normalize by the end of July.
Tomorrow's US June employment report is expected to confirm that the labor market has remained resilient. Household consumption remains strong, corporate earnings prospects are favorable, and substantial AI infrastructure investments by large technology companies continue to support economic growth. Consensus forecasts expect the June employment report to show that the US economy added 115,000 jobs while the unemployment rate remained at 4.3%, which is historically low. The Federal Reserve's preferred inflation measure, the PCE price index, accelerated to 4.1% in May, largely due to higher energy prices following the Iran conflict, while core PCE rose to 3.4%, in line with expectations. Consensus forecasts project US GDP growth of 2.1% this year and corporate earnings growth of around 21%, reflecting a strong economic environment.
We overweight equities and underweight money markets. Within equities, we overweight EM equities, underweight European equities, and remain neutral elsewhere. In fixed income investments, we overweight high yield corporate bonds and underweight government bonds, while remaining neutral on emerging market bonds and investment grade corporate bonds.
