Equity Perspectives - Second Issue, 2026

Our thoughts

• With the recent spike in oil prices, we take a prudent approach and are assessing the medium-term growth impact of a potentially prolonged rise in energy prices. Even if tensions with Iran de-escalate, oil and gas prices may take time to return to pre-conflict levels, and a prolonged period of elevated prices could ultimately weigh on growth.
• While our CIO office trimmed global equities from overweight to neutral in March 2026 on heightened macro risks tied to a prolonged Iran conflict, we remain Neutral on US equities, supported by the US’s net oil-exporter status and a more reasonable MSCI US valuation, which provides for better tactical opportunities.
• During the recent market volatility, we highlighted tactical entry points in US equity ideas aligned with more enduring themes in our view such as AI infrastructure, aerospace & defence, select quality software/cybersecurity, industrial power demand, and mining ideas. Given our shift to Underweight US Financials in March 2026 amid further cracks in private credit and a tougher geopolitical backdrop, we remain selective within the sector.

• The next focus will be the Q1 reporting season, which is underway since mid-April 2026 and seen banks delivering solid results.
• With FY26E earnings growth for US equities at ~18.7% (versus ~17% for World, as of 16 April 2026), we await updated guidance from firms, which may see some adjustments from more vulnerable sectors such as consumer discretionary. Information technology has seen choppy trading this year amid intensifying memory shortages and selloffs triggered by new AI model capabilities. Still, mega-cap commitment remains strong, with ~US$650b of AI infrastructure capex announced.
• We maintain a diversified approach in the sector focused on quality technology  leaders to capture longer term secular AI growth opportunities. For the reporting season, investors are expected to focus on firms’ updates on recent cloud demand trends, AI monetization progress and advertising spend outlook, which could feature some pockets of uncertainty given higher oil prices amid the Iran conflict. 

Our thoughts

• Europe is highly exposed to a sustained rise in LNG prices as LNG imports make up as much as 40% of total energy imports. A prolonged price shock would likely hit business and consumer confidence echoing 2022 when Europe typically underperforms. We have therefore turned more cautious on the region.
• Higher oil and gas prices remain a clear risk to global growth, particularly for autos, travel/leisure, and consumer-exposed stocks — sectors with heavy representation in Europe. Earlier this year, we moved Energy to Neutral and favoured oil equipment & services. Near-term beneficiaries could include fertiliser producers and metals critical to electronic warfare, as supply disruptions and geopolitical risk intensify.

• We still see longer-term appeal in select Industrials, supported by rising defence and infrastructure outlays and Germany’s 2025 fiscal plan. However, slower growth is pressuring lower-rated and private credit, highlighted by rising redemptions from private credit and equity funds. While Europe is less exposed to private markets, we downgraded Banks and Financial Services to Neutral: cheap valuations and strong balance sheets may not fully cushion further drawdowns or weaker earnings.
• The FTSE 100 set a new record in February 2026 as investors rotated toward defensives amid AI-driven volatility. Sentiment also benefited from last year’s trade agreements with the US, EU and India; November 2025’s Autumn Budget was less onerous than feared. The UK is no longer as cheap as at the start of 2025, but it still screens as value — FTSE 100 trades at 13.6x forward P/E (as of 19 April 2026).