Should Investors Continue to Underweight the US Dollar Relative to Other Major Currencies?
Yes. We continue to expect the US dollar to weaken relative to other major currencies over the next several years.
Authored by: Thomas O'Mahony
Starmer’s Resignation as UK PM Sees Focus Shift to Burnham’s Fiscal Stance
Keir Starmer’s resignation formalises a political transition that had already been widely anticipated after Labour’s poor local election results and months of pressure on his leadership.
UK Political Turmoil Adds Noise, But Gilts Will Remain Driven By Broader Macro Forces
Large losses in last weekend’s local elections have increased pressure on Labour Party leader and Prime Minister Keir Starmer. Frustration was already building within the Labour Party over the lack of visible progress on key priorities, compounded by weak approval ratings.
Will the Iran War Force the ECB and BOE to Tighten as Much as Markets Expect?
No, we do not think so. While the European Central Bank and Bank of England have adopted a more hawkish tone in response to the Iran-driven energy shock, we believe markets are overpricing the amount of tightening that will ultimately be delivered.
The Iran War: Impact on Energy, Inflation, and Markets
The war in Iran has triggered a historic disruption in the Strait of Hormuz, driving oil & gas prices higher and exposing vulnerable energy-importing regions. This shock is fueling concerns over higher inflation and rising bond yields, creating a volatile environment where commodities lead while global equities and traditional bond diversifiers underperform.
Review of Market Performance: Calendar Year 2025
Global economic growth hovered near trend in 2025. The dollar weakened sharply, while global equities and commodities posted strong gains. Bond returns improved as rates and credit spreads eased.
Have Tail Risks to the US Economy Increased?
Yes. The range of possible outcomes for the US economy has widened, with greater chances of both positive and negative tail events.
2026 Outlook: Public Equity Views
Within public equities, investors should modestly overweight global ex US equities, developed markets small-cap stocks, and Latin American equities in 2026, as these regions offer attractive valuations, improving growth prospects, and diversification benefits.
Long Bond Performance Does Not Signify an Impending Debt Crisis
Long-dated government bonds have come under pressure in recent months, but markets are not beginning to price in a fiscal crisis in our view. Drawing on market data and institutional trends, we believe they will continue to behave defensively during deflationary shocks.
Market Response to US-Iran Escalation Limited So Far
Given the fluidity of the situation in the Middle East and the uncertainty surrounding how events may unfold, we believe most investors should not make changes to portfolios in response to this event.