Market Compass April 2026

Highlights:

• The war makes the near-term investment outlook uncertain, suggesting a preference for a risk management approach. The AI capex boom may cushion the economic headwinds from the negative supply shock (war, energy) and offers the longer-term promise of higher productivity and corporate margins.
• Our base scenario sees a near-term peak in oil prices around $120/bbl, followed by slow de- escalation. The main risk scenariosees escalation and a surgetowards $150. The unilateral end of the US military operations, without a full reopening of the Strait of Hormuz, would be an in-between scenario.
• The pre-war global economy was on a strong footing; this offers hope of resilience. The situation appears less dangerous than in 2022 – an awful year for balanced portfolios; we see stark differences, not least the fact that monetary policy starts from a neutral, rather than a super- accommodative position.
• In our risk-management framework, we continue to favour Credit. The war has confirmed the declining appeal of Govies as safe haven.We have reduced, not cancelled, our defensive duration position. We recommend a cautious Equity overweight, balancing cyclicals and defensives.
   

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