Market Outlook 2026 – Update Q2
by
Felix Ronner
An update on the global economy in the second quarter of 2026: From increasing geo-economic fragmentation and rising inflation risks driven by geopolitical tensions to heightened market volatility. Discover the key developments and drivers shaping the current market environment and their implications for the coming quarters.
Structural Environment – Geo-economics and Fragmentation
The global economic order is increasingly shifting from globalisation towards geo-economic fragmentation. Trade and capital flows are becoming more politicised, while the international system is reorganising along geopolitical blocs. At the same time, the importance of rules-based trade mechanisms continues to decline.
Structural factors such as high debt levels, demographic developments and limited productivity growth are leading to subdued global trend growth. The resulting increase in inequality is reinforcing political tensions and polarisation – both within economies and between the “West” and the “Global South”.
Economic Outlook – Moderate Growth with Elevated Risks
Global growth continues to be supported by monetary and fiscal policy impulses and is expected to remain moderate. The US economy remains relatively robust, while Europe is showing a modest recovery. Overall, however, the outlook remains fragile.
Downside risks are significant. In particular, the Iran war is fuelling inflation through higher energy prices and weighing on the global recovery. At the same time, structural challenges – such as weak domestic demand in China combined with rising production capacity – are increasing pressure on industrial sectors in advanced economies.
Influencing Factors – Geopolitical and Structural Risks
Geopolitical risks have increased significantly and are likely to remain elevated over an extended period. Conflicts in the Middle East and beyond are particularly affecting energy production and transportation and are reinforcing the fragmentation of global trade.
As a result, inflationary pressures are likely to become broader and more persistent than previously expected. In addition to oil and gas, refined products and agricultural goods are increasingly affected. At the same time, monetary policy remains uncertain, while political and demographic developments add further structural risks.
Market Environment – Opportunities Amid Elevated Volatility
Financial markets are reacting to the changing environment with increased volatility. Geopolitical uncertainty, rising input costs and position adjustments are amplifying short-term market movements. At the same time, traditional safe havens such as the US dollar and the Swiss franc remain robust.
Despite short-term uncertainties, the long-term environment for risk assets remains broadly constructive. Equity markets continue to benefit from rising corporate earnings, while in fixed income, short- to medium-term high-quality assets remain attractive. Precious metals are additionally supported by the geopolitical environment.
The full Market Outlook with an update for Q2 2026 can be downloaded here.