The first half of 2026 has been defined by two powerful themes: the continued acceleration of artificial intelligence (AI) and the return of policy and geopolitical risk as dominant market drivers.
AI has been the primary engine behind equity market performance. What began as a narrow theme concentrated around the largest US technology names has broadened into a global debate about how rapidly the technology is advancing, which sectors may be disrupted, and where the next phase of value creation will emerge. The scale of investment in data centres, infrastructure and computing capacity remains significant, but markets are increasingly asking a more demanding question: when, and where, will that investment be monetised?
At the same time, the geopolitical backdrop has become more complex. US policy under President Trump has continued to shape market expectations, while the war in Iran has created a material energy shock, pushing inflation and supply risk back to the centre of the debate and erasing the ‘Goldilocks’ narrative that dominated at the start of the year. Instead, markets are now having to consider a more difficult combination: sticky inflation, higher energy costs, more cautious central banks and the potential for slower growth.
So far, risk assets have remained relatively resilient. Equity markets have been supported by the AI theme, while credit spreads have remained tight and demand for yield has stayed strong. But beneath the surface, the outlook is becoming more fragile. Higher long-term yields are beginning to tighten financial conditions, inflation risks are more clearly visible in government bond markets, and earnings expectations may need to adjust if input costs rise or consumer demand weakens.
The question is no longer simply whether markets can continue to rise, but which companies, sectors and capital structures are best placed to absorb a more complex mix of risks.
That is where active management becomes especially important. In a market shaped by narrow leadership, shifting policy risk and growing pressure on margins, broad exposure can be a blunt tool. The ability to look company by company, identify resilient business models and avoid those most vulnerable to higher costs, weaker demand or disruption will be critical.
We believe this environment plays directly to the strengths of our focused investment approach. Across European and Swiss small- and mid-caps (SMID), convertible bonds and global fixed income, our teams are fundamentally bottom-up investors. They spend their time understanding individual companies, management teams, balance sheets and business models. In an environment where idiosyncratic risk is rising, that focus on selectivity, niche champions and company-level insight should become increasingly valuable.
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