• The global economic outlook has improved since the agreement of a ceasefire in the Middle East and an easing of energy prices
  • Fixed income markets are supported by stable core interest rates, strong corporate balance sheets and investor demand for income-producing assets
  • Equity markets continue to benefit from AI-driven growth; while concerns over a bubble persist, valuations remain moderate, and earnings growth looks robust 

By Chris Iggo, Chief Investment Officer, AXA IM Core (part of BNP Paribas Asset Management) and Daniel Morris, Chief Market Strategist, BNP Paribas Asset Management

The global macroeconomic outlook was dominated by two themes in the first half of 2026: the Middle East conflict and the continued boom in artificial intelligence-related spending.

Higher energy prices threatened energy-dependent economies and consumer spending. But AI capital expenditure led to a firming of manufacturing activity in several economies as demand for construction materials, networking hardware and other associated inputs to build data centres soared.

On balance, growth forecasts were revised down, although the extent of these revisions was limited.

A key concern has been the impact of higher energy prices on inflation with central banks turning more hawkish as a result.

While the market shifted to price in higher official rates, only the European Central Bank and the Bank of Japan raised rates following the start of the conflict in the Middle East.

This modest tightening of global monetary conditions has done little to impact the performance of financial markets nor indicators of credit demand. Once again, the global economy has proved its resiliency in the face of a significant supply shock.

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