Colin&Cie’s assessment of the current market situation
Six months after the outbreak of the Iran conflict, a further escalation in the war in Ukraine, and the continuation of U.S. tariff policies, financial markets have demonstrated not only remarkable resilience but have also recently gained noticeable upward momentum. What is driving this performance, and which factors are likely to shape market dynamics in the months ahead? The Colin&Cie analysis provides the answers.
Situation assessmentThe current performance of financial markets is being supported to a significant extent by the improving economic outlook in the United States and parts of Europe. This recovery is underpinned by historically low unemployment rates, currently standing at 4.1% in the U.S. and 6.3% in the Eurozone, as well as the continued impact of government investment programs.
Crude oil prices have proven less disruptive than initially feared. Despite considerable volatility triggered by the evolving situation in Iran, there has so far been no noticeable negative impact on the global economy. While crude oil markets remain highly sensitive to geopolitical developments, a combination of sufficient supply, releases from strategic petroleum reserves, and coordinated production increases by major oil-producing countries outside the immediate conflict region has helped prevent an excessive surge in prices.
The prices traded on the futures market (red stars in the chart below) indicate a generally lower Brent crude oil price over the next six to eighteen months. At the same time, they reflect expectations that the conflict between Iran and the US will ease or that dependence on oil from the Middle East will decrease.
Chart: Chart: Brent oil price trend (Data: LSEG Datastream)
Amid relatively moderate developments in crude oil prices, market-implied inflation expectations continue to point toward a gradual convergence of inflation rates with central banks’ 2% targets. Despite this favourable trend, monetary easing remains unlikely in the near term, while the opinions are divided regarding the possibility of rising interest rates. From a macroeconomic perspective, the prevailing economic environment would support the case for an additional interest rate increase. While no such move is currently anticipated from the Swiss National Bank (SNB), and the U.S. Federal Reserve (Fed) is generally expected to maintain a cautious stance until later in the year, market-implied rate expectations in the Eurozone already indicate a further increase in September 2026, following the step implemented in June 2026. Such expectations reflect the European Central Bank’s (ECB) continued focus on containing persistent underlying inflationary pressures. At the same time, the resilient economic backdrop, characterized by robust labour markets and sustained domestic demand, provides policymakers with additional scope to maintain a restrictive monetary policy stance.
Chart: Implied interest rate trends in the eurozone (Data: LSEG Datastream)
Bond markets
The rise in interest rates across the yield curve has weighed on the prices of outstanding euro-denominated bonds. Against this backdrop, Colin&Cie currently favours bonds with medium-term maturities. These continue to offer attractive yields while limiting interest rate sensitivity compared with longer-dated bonds. At the same time, intermediate-term bonds provide a yield premium over short-term instruments, resulting in a compelling balance between return potential and risk exposure.
Equity markets
The solid global economic environment has supported strong growth in corporate earnings across the major economic regions, a trend confirmed by companies’ second-quarter 2026 results. Accordingly, equity markets in the United States, Europe and emerging markets have continued to strengthen. Several key indices reached new record highs, including the S&P 500, which tracks the 500 largest listed U.S. companies, the STOXX Europe 600, comprising 600 companies across 17 European countries, Switzerland’s SMI, and Germany’s DAX.
Chart: Performance of the S&P 500 share index (Data: LSEG Datastream)
Outlook
The momentum and technical trends of the equity markets remain fundamentally intact due to the stable economic situation. However, the deviation of the leading indices from their long-term moving averages has widened as a result of the dynamic performance in 2026, thereby increasing the risks and the potential for a setback.
Bonds, in our assessment, are supported by conditions that currently allow for a steady performance, given the now more attractive yield‑to‑maturity levels. Following the rise in interest rates across the entire yield curve, medium- to long-term interest rates are likely to remain largely stable, whilst higher rates at the short end are probable, particularly in regard to the ECB policy.
Economic policy risks – such as regulatory burdens, tax adjustments or inflationary trends – have recently diminished. Geopolitical tensions, on the other hand, particularly those arising from ongoing flashpoints, remain elevated and continue to represent a significant source of uncertainty.
The market environment therefore remains in a balanced, but carefully to be monitored state.
Disclaimer - legal notice
This publication was produced by the Investment Office of the Colin&Cie Group. The information and opinions contained in this document are based on sources we believe to be reliable. However, we cannot guarantee the reliability, completeness or correctness of these sources. All information and quoted rates are only up-to-date at the time of this publication and are subject to change at any time without notice. The content is based on numerous assumptions made by the Colin & Cie Group. It should be noted that different assumptions can lead to materially different results. The forecasts and assessments are only current at the time this publication is prepared and can change at any time without prior notice. Past performance of an investment is not a guarantee of future results. Certain investments can experience sudden and substantial losses in value. This information and views do not constitute a solicitation, offer or recommendation to buy or sell investment instruments or to carry out any other transactions. We recommend interested investors to consult their personal advisor before making decisions on the basis of this document so that personal investment goals, financial situation, individual needs and risk profile as well as further information can be duly taken into account as part of a comprehensive consultation. This publication does not consider individual or future investment objectives, tax circumstances, or the specific needs of any particular investor. Colin&Cie and its affiliated companies may hold positions in the mentioned asset classes or financial instruments or manage them on behalf of clients. The information contained in this publication is marketing material that is distributed for advertising purposes only.
