LGT Private Banking House View

June 2026 - in a nutshell

Generally speaking, the price of oil is primarily driven by the global economy and the resulting demand for oil; however, the impact of market disruptions is significantly greater when supply becomes the determining factor. This is currently the case due to the ongoing blockade of the Strait of Hormuz, which has noticeably increased inflationary pressure worldwide and made market forecasting more difficult: higher price levels, more cautious sentiment, and less hope for imminent monetary policy relief. And yet the global economy has so far proved more resilient than the headlines suggest - particularly the US economy, where consumption, the labour market and corporate profits remain surprisingly robust.

  • Date
  • Author Patrick Huber, Investment Solutions Europe, LGT Private Banking
  • Reading time 7 minutes

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However, this is not yet a comfortable environment for the financial markets, nor is it a classic crisis scenario. Risks are currently widely dispersed and vary greatly from region to region: the eurozone is suffering more from the energy shock, whilst the US is structurally better positioned. Against this backdrop, we are maintaining a balanced risk allocation: equities remain "Neutral", bonds "Underweight", alternative investments "Overweight" and liquidity "Neutral" relative to the strategic allocation. Within equities, we continue to favour the US over Europe, whilst gold underlines its role as a strategic stabiliser.

At the same time, in this issue we are deliberately looking further ahead with a double-page spread on our Strategic Asset Allocation 2026. It shows how we are further developing our long-term portfolio foundation in an environment of heightened macroeconomic uncertainty, changing interest rate regimes and geopolitical upheavals - with greater liquidity, a refined regional equity weighting and a stronger focus on gold and insurance-based investments.

Macroeconomic environment

The energy price shock following the closure of the Strait of Hormuz has materially intensified global inflation pressures and shifted the growth-inflation mix in a more stagflationary direction. Despite a pronounced deterioration in sentiment, the world economy’s underlying vital signs remain surprisingly resilient - particularly in the United States, where consumption, labour markets and industrial activity continue to hold up. While monetary policy tailwinds are likely to remain absent in 2026, we do not currently diagnose a severe illness of the global economy.

Investment strategy

Despite a mixed macroeconomic backdrop and rising inflation pressures from higher energy prices, we see market risks as broadly balanced. Supported by resilient corporate performance and strong earning. We therefore maintain a balanced risk appetite and leaving our overall tactical positioning unchanged At the top level, equities remain "Neutral", fixed income stays "Underweight", alternative investments remain "Overweight", and cash stays at "Neutral" relative to the strategic weight. 

Equity strategy

Equity markets recovered strongly after hopes for a ceasefire between Iran and the US continued to gain ground even though the Strait of Hormuz remains closed, energy costs remain high, and inflation is rising. The reasons are, first, the continued belief that the Middle East crisis will be resolved sooner rather than later and, second, a very strong earnings season. However, risks remain high, particularly if interest rates continue to rise. The sharp increase in interest rates in mid-May, driven in part by elevated inflation data, led to a decline in equity prices. In such a symmetric risk environment, we maintain a more balanced risk appetite and focus on more defensive, less cyclical regions and sectors. The US remains our preferred region, supported by strong earnings growth driven by AI and, increasingly, by other sectors as well as by lower energy dependency on the Middle East. The euro area, on the other hand, remains our least favoured region due to its higher exposure to cyclical sectors and higher energy costs.

Fixed-income strategy

Global government bond markets are seeing a synchronised rise in yields, which has driven rates at the ultra-long end of the curve to multi-year highs amid a global reassessment of duration risks. In addition to the geopolitical oil price shock, chronically expansionary fiscal policy and the limited visibility of central banks due to a lack of forward guidance are weighing on yield curve structures. What fundamentally distinguishes the two major economic regions are the growth outlooks: whilst the US economy remains robust, thereby supporting yields at the long end, recessionary signals are mounting in Europe. For ten-year US Treasuries, the potential for lower yields therefore remains limited in the medium term. Given the high level of uncertainty surrounding the Middle East conflict - which swings between diplomacy and escalation - we are consistently maintaining a neutral duration position. At present, there is no clear signal for a change in duration, either from inflation expectations or from the diplomatic process.

Currency strategy

The FX outlook remains biased towards a moderately softer US dollar over the medium term, although near-term moves may stay volatile because of Middle-East tensions, energy prices and global growth uncertainty. EUR/USD remains constructive, with the greenback expected to lose some support as the US rate advantage narrows, while the yen is seen recovering only gradually, with Japanese authorities still focused on limiting excessive weakness. 

Precious metals

Gold remains the preferred precious metal in the current environment, as the sell-off appears to have been driven mainly by liquidity pressures, deleveraging and positioning rather than a deterioration in underlying fundamentals. Demand has stayed firm, supported by strong bar and coin buying, continued central bank purchases and ongoing reserve diversification, even as jewellery demand has weakened. By contrast, silver still offers upside but its heavier industrial-demand exposure and higher volatility leave the overall risk-reward balance more even, supporting a "Neutral" stance.

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