Despite ongoing military conflicts, equity markets pushed to new highs towards the end of April. For the S&P 500, April 2026 marked the strongest monthly performance since 2020. Year to date, the benchmark US index gained 5.6%, while the technology-heavy Nasdaq Composite advanced 8.1%. The small-cap Russell 2000 rose 13.3% since the end of December. Europe has been less resilient since the outbreak of war at the end of February: the STOXX 600 remained up 3.1% year to date, whereas the Swiss Leader Index slipped into negative territory, down 2.0%. In Asia, South Korea (+57%), Taiwan (+34%) and Japan (Nikkei 225: +18%) led the gains, while the Shanghai Composite rose 3.6%.
Following a period of sideways trading and modest declines until early March — when bond markets were still pricing in further rate cuts — a combination of geopolitical tensions and persistent inflation triggered a clear reversal. Yields on 10-year government bonds rose sharply across markets into early May. US Treasuries most recently yielded 4.38% (end-2025: 4.15%), while 2-year yields, at 3.89%, moved above the Federal Reserve’s target range of 3.50–3.75%, signalling that markets are now leaning towards the possibility of rate hikes rather than cuts. German 10-year Bund yields climbed to 3.03% (end-2025: 2.86%), UK gilts rose to 4.97% (4.47%), and Swiss government bond yields increased to 0.39% (0.32%).
Across major central banks, a shift in direction has become evident. At the start of the year, markets anticipated further easing; however, the energy price shock, persistent inflation and resilient labour markets have effectively halted expectations of rate cuts in 2026. Australia has already delivered two rate hikes. In the US, Europe and Switzerland, rate cuts are no longer expected this year. By contrast, in emerging markets, Russia and Brazil have cautiously begun easing from elevated levels.
In credit markets, high-yield spreads widened markedly into the end of March — from 281 to 386 basis points in the US and from 270 to 337 basis points in Europe — before partially retracing in April to 283 basis points and 280 basis points, respectively. Overall, high-yield bonds have marginally outperformed investment-grade credit so far this year. In private debt and private credit markets, conditions stabilised somewhat, with no further signs of contagion.
Commodity markets were dominated by the sharp rise in energy prices. Brent and WTI crude gained roughly 78% year to date. The rally in gold and silver has lost momentum in recent months, with prices still up 6.9% and 5.7%, respectively, versus end-2025. Copper has strengthened more recently, rising 5.8%. Bitcoin and Ethereum have recovered from recent lows but remain below their levels at the start of the year (Bitcoin -10%, Ethereum -22% in USD terms).
In foreign exchange markets, the Australian dollar stood out for its strength. EUR/USD traded within a range of 1.15 to 1.20 and most recently stood at 1.172. The Swiss franc appreciated by 1.4% against the US dollar (to 0.782) and by 1.6% against the euro (to 0.916).
US economic growth for the first quarter of 2026 was estimated at 2.0%. For the second quarter, the Atlanta Fed’s GDPNow model currently points to growth of 3.5% (as of 1 May 2026). Headline inflation stood at 3.3%, with projections of 3.56% for April and 3.88% for May (Cleveland Fed nowcasting, as of 1 May 2026). Solid growth, a resilient labour market and elevated inflation argue against near-term rate cuts. A leadership transition at the Federal Reserve is also expected over the course of the month.
It is remarkably easy to hold firm convictions when one is not responsible for making decisions. From the sidelines, moral clarity appears as the default setting, and political actions are judged through the lens of personal virtue or instinctive aversion. The prevalence of so-called “derangement syndromes” reflects this tendency, where the noise of opinion drowns out the mechanics of governance. Yet reality is more unforgiving: in the arena of power, notions of “right” and “wrong” are often secondary to what is feasible and necessary. Leadership is less about preserving ideological purity than about navigating the frictions of the moment. An excessive focus on personalities risks obscuring the underlying structure — overlooking that while convictions define our aspirations, it is circumstances that ultimately shape outcomes.
Against this backdrop, it is essential to avoid emotionally driven investment decisions. Based on the current data, we expect a reflationary scenario in the coming months, characterised by rising growth and inflation. Alternatively, a Goldilocks scenario — with solid growth and moderating inflation — cannot be ruled out.
Both scenarios are broadly supportive for risk assets. Market signals also appear cautiously constructive for global equities. Strong earnings growth and the ongoing AI-driven investment cycle provide a fundamental counterbalance to concerns around elevated energy prices and rising bond yields. We maintain our globally diversified equity allocation and would consider adding selectively on market weakness.
In fixed income, we continue to favour medium-duration exposures in the three- to seven-year range. Current yield levels appear attractive, while bonds retain their role as a buffer in the event of an economic slowdown.
In credit, we continue to prefer investment-grade over high-yield bonds and remain selective in private credit. A further test of confidence may emerge towards the end of June, when elevated redemption volumes are expected. Exposure to emerging market bonds — particularly in commodity-exporting countries — appears worth considering.
While gold may face short-term pressure, we maintain our strategic allocation. It remains a key hedge against monetary and fiscal policy risks.
Trend-following strategies (CTAs) have performed well year to date and continue to serve as an effective diversifier given their low correlation to traditional asset classes.
In foreign exchange, we expect the Swiss franc to remain firm against both the euro and the US dollar. Commodity currencies such as the Australian, New Zealand and Canadian dollar could surprise on the upside. The Japanese yen also bears watching; a stronger yen would not be surprising, particularly given its significant undervaluation on a purchasing power parity basis.