Swiss private bank Bank J Safra Sarasin shares its insights on the macroeconomic outlook and asset allocation, indicating a preference for US and emerging market equities, and gold.
Like a number of wealth managers, Claudio Wewel, FX strategist at
Bank J
Safra Sarasin continues to favour emerging market equities in
2026, driven by tech, despite higher oil prices amidst the Middle
East conflict.
Wewel said that emerging market equities were the top
performers, rising by close to 15 per cent in April, followed by
US equities. “Both have been largely driven by the stellar
performance in the semiconductor space, which continues to
benefit from the buildout of AI-related infrastructure,” he said
in a note this week. “European and UK equities lagged. Fixed
income markets stabilised as policy rate hike expectations
moderated, while gold extended its recent consolidation.”
“The US economy continues to demonstrate robustness, with
above-trend growth, supported by expansionary fiscal policy and
AI-related capital expenditure. Given energy self-sufficiency,
the growth impact from higher oil prices should be less severe in
the US than in other advanced economies,” Wewel continued. The
inflation impact, however, is more visible. He expects US
inflation to reach 3.5 per cent in 2026, while GDP growth should
moderate to 2 per cent.
Wewel believes that the euro area remains more vulnerable to the
energy shock than the US, given its dependence on imported energy
and the higher weight of energy-intensive sectors. “Germany’s
large fiscal programme will continue to support demand, but
higher oil and gas prices are a key risk to the recovery and have
begun to weigh on sentiment indicators,” he continued. For the
current year, he expects euro area growth to moderate to 0.9 per
cent and inflation to increase to 2.4 per cent. He expects the
European Central Bank (ECB) to hike rates in June and September
to ensure that inflation expectations remain well anchored. The
UK economy looks more fragile, with weak growth, high energy
sensitivity and limited policy support. As a result, he expects
the Bank of England to hike only once in 2026.
Wewel highlighted that Asia is disproportionately exposed to the
closure of the Strait of Hormuz, as many economies rely heavily
on Middle Eastern energy imports. Japan faces a difficult mix of
looser fiscal policy, elevated inflation and higher import costs.
Still, he expects the Bank of Japan to hike twice this year,
although the war is reducing the case for further tightening
in 2027. “China is better positioned than most oil importers. It
is the world’s largest crude oil importer, but oil accounts for
only around one-fifth of its energy consumption, and retail
fuel-price controls limit the pass-through to consumer
inflation,” he said. Exports, especially green-tech goods, remain
strong, while new investment projects should support domestic
demand. He expects China”s growth to reach 4.5 per cent in
2026, with inflation rising to 1.5 per cent.
Equities
“Global equities have risen to a new all-time high in April, with
the US and emerging markets outpacing Europe and Japan,” Wewel
said. He favours emerging market and US equities, as emerging
market earnings are supported by Taiwan and Korea’s technology
cycle and should benefit from a weaker dollar later this year.
Regionally, he is more cautious on the euro area after its strong
run and on Japan, where high valuations and the high sensitivity
to the yen increasingly suggest downside risks.
In terms of sectors, Wewel prefers technology, communication
services, utilities and healthcare. He is less constructive on
staples, where valuations look stretched and he is cautious on
energy, as oil prices should normalise towards year-end.
“The financial results from the reporting season that has just
begun are meeting high expectations and point to a generally
positive growth momentum. The high oil price, however, remains
the greatest risk to the global economy, although the impact
varies across different regions,” Wewel continued. For this
reason, he has taken profits and reduced his equity allocation
slightly. Nevertheless, he remains slightly overweight in
equities and slightly underweight in bonds. He sees the outlook
for duration improving, although carry is likely to remain the
main driver of returns in 2026. He retains a preference for
intermediate maturities of five to seven years. Credit spreads
have widened only moderately and remain close to historic lows.
Wewel stays neutral on credit, as current spreads do not yet
justify a structural underweight.
Within equities, he continues to favour emerging markets. He also
maintains slight overweight positions in gold and commodities.
His increased cash holdings allow him to seize opportunities in
this dynamic market environment.
Wewel is not alone in his views. Mark Haefele, chief investment
officer at UBS
Global Wealth Management, believes that Asia’s resilience
should continue amid strong earnings and appealing valuations.
“Asia Pacific has led the gains across global equities this year,
with the MSCI Asia ex-Japan index rising 16 per cent year to
date,” Haefele said in a note this week. Absent of a prolonged
energy shock, he believes this resilience can last. Structural
forces such as the AI boom continue to be a powerful growth
engine for the region, and most Asian economies remain on a solid
growth trajectory. He continues to see a strong case for Asia
Pacific markets, including China and South Korea, and believes
that investors should consider opportunities beyond the US for
diversification. In line with a number of wealth managers, Edmund
Shing at BNP Paribas Wealth Management also favours
gold and emerging market equities in 2026, despite
volatility arising from the conflict.
Although US stocks declined on Monday as renewed tensions in the
Middle East pushed oil prices higher and heightened concerns
about regional instability, Haefele also maintains a positive
outlook for US equities. He sees opportunities across financials,
healthcare, industrials, utilities, and consumer discretionary.
He believes that there is room for US equities to move higher by
the end of the year, as corporate earnings continue to show
strong profit growth. US equities remain near record levels and
big tech results last week confirmed sustained AI demand.