The main points of the allocation meeting on July 15, 2026
The re-escalation of tensions between Iran and the United States has pushed oil prices higher. In recent days, the United States has carried out strikes on Iran’s military infrastructure while Iran has targeted U.S. military bases in the Middle East. Iran has announced the closure of the Strait of Hormuz, whereas the United States has stated that it will keep the waterway open. On Monday, U.S. President Donald Trump also announced the reinstatement of the U.S. blockade on Iranian maritime traffic. As the conflict has re-escalated, Brent crude oil has risen from around USD 71 per barrel at the beginning of July to approximately USD 85 per barrel. Although the two sides signed a memorandum of understanding in June aimed at ending the war, the recent attacks and uncertainty over control of the Strait of Hormuz have increased uncertainty over the progress of the negotiations.
The second quarter earnings season got off to a strong start this week as major U.S. banks reported results that were, on average, around 45% higher than a year earlier. In the United States, earnings of S&P 500 companies are expected to grow by 22% in the second quarter while information technology companies are forecast to deliver earnings growth of 59% on a year-over-year basis. In Europe, earnings for STOXX Europe 600 companies are expected to rise by 12%. Higher energy prices have supported the energy sector, where earnings are projected to grow by 110% in the United States and 113% in Europe—more than in any other sector. Emerging markets are expected to post the strongest regional earnings growth, with MSCI EM companies forecast to increase earnings by 68% driven by semiconductor companies benefiting from AI-related investment.
Inflation remains elevated in the United States, but the economy continues to perform strongly. June inflation data released on Tuesday showed headline inflation slowing from 4.2% to 3.5%, while core inflation, which excludes food and energy prices, fell from 2.9% to 2.6%. The labor market remains resilient, investment activity continues at a high level, and consensus forecasts expect the U.S. economy to grow by 2.1% this year. In his speech on Tuesday, the new Federal Reserve Chair, Kevin Warsh, reiterated the importance of maintaining price stability. At present, Fed funds futures are pricing in one rate hike this year.
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.
