Barometer: The outlook for US and emerging markets stocks remains strong

As the skies clear, investors can now refocus on a landscape that is overall positive: ample global liquidity, strong corporate earnings dynamics, stable though unspectacular economic growth, mild inflation (despite risks of an increase), and more attractive valuations than two months ago for many asset classes. With all this in mind, we feel more comfortable adopting a moderately risk-friendly position by adding exposure to emerging market assets, US stocks, and industrial sectors.

However, we maintain a selective risk allocation: we aim to avoid depending on a single macroeconomic or geopolitical development. Therefore, we maintain an overall neutral allocation in equities, bonds, and cash.

Our cyclical indicators support this view, suggesting a moderately positive macroeconomic environment for the world as a whole. The main message from the leading indicators we monitor is that economic activity is still largely resilient in most developed economies and much of Asia. The energy shock transmission that is emerging remains limited outside of surveys and price indicators. Our base scenario still projects global economic growth of 2.8% this year, slightly above potential, while inflation averages around 3%.

That being said, risks are pointing towards lower growth and higher price pressures. Indeed, if the closure of the Strait of Hormuz extends into the summer, it could trigger a significant recession in Europe and some emerging economies, even in the United States. As long as this maritime passage remains closed, oil prices fluctuate between $110 and $120 per barrel, compared to levels around $70 before the war and a long-term fair value of $80 according to our model (see Fig. 2).

The rise in oil prices creates winners and losers. Emerging economies are relatively resilient, with energy exporters being obvious beneficiaries, while other countries are in a stronger position than during previous shocks, thanks to better economic growth, lower external vulnerability, and the cushioning effect of stronger interest rates.

In the United States, the situation is more balanced. The American consumer is likely more fragile than overall growth suggests: consumption figures are already weak, disposable income growth has significantly slowed, consumer confidence is near historic lows, and rising oil prices are expected to further reduce real incomes. However, spectacular windfalls are expected for the country’s oil producers, offsetting the overall impact on the economy.

Conversely, in Europe, the oil shock is clearly negative. Expectations for a recovery are fading, and stagflation poses an imminent threat. We have lowered our growth forecast in the eurozone for the year to 0.9% (from 1.3% two months ago) and raised our inflation forecast to 2.7% (from 2.0%).

Fig. 2 – Uncertainty on oil prices Brent oil price scenarios based on the duration of the closure of the Strait of Hormuz, dollar per barrel

Source: Federal Reserve Bank of Dallas, “What the closure of the Strait of Hormuz means for the global economy”, March 20, 2026, https://www.dallasfed.org/research/economics/2026/0320, Pictet Asset Management. Scenarios adapted from the Fed model, which generates trajectories for oil prices from a calibrated global oil market model (non-linear DSGE model), in which a closure of the Strait of Hormuz is treated as a significant and temporary negative supply shock. For each assumed closure period (1, 2, or 3 quarters), the model simulates the future to obtain the quarterly implied trajectory of crude oil in 2026. Pictet Asset Management’s fair value is based on an estimated $15 increase in the floor price of crude oil (compared to the period before the war) due to reduced inventories and a much tighter supply/demand balance. Recession threshold based on a 50% deviation from the actual oil price movement. Data as of April 28, 2026. *36-month forward contract.