7th July 2026
Schroders: From geopolitics to policy: what drives bond yields next
June 2026 update: With a resolution in the Middle East now looking more likely, we take a look at how bond markets may react once the focus moves away from geopolitics.
With a resolution in the Middle East now looking more likely, we outline how we see the different scenarios playing out — and where we currently prefer to position portfolios — as the focus shifts away from geopolitics.
Two things are clear. Firstly, stronger US data is reducing the prospect of interest rates cuts by the Federal Reserve (Fed) and making hikes over the next year more likely. Secondly, while our view has become more hawkish, so has market pricing. We still see a slightly higher chance of the Fed staying on hold (“warming up”) than markets imply.
Probabilities assigned to our scenarios have turned more hawkish – but to a lesser extent than the market
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