Our multi-asset investment views – July 2026
As in previous months, we continue to see a low risk of recession in the United States given the underlying strength of the labour market. Risks still lean towards inflation being higher rather than lower, with the added uncertainty created by energy disruption in the Middle East. Compared with the start of the year, the biggest change in our outlook is in bond markets: investors have shifted from expecting interest-rate cuts to expecting rate rises. Longer-term bond yields have risen because investors are demanding extra compensation for taking on uncertainty and holding bonds for longer.
The main exception to this is inflation expectations which still look stable and broadly in line with central banks’ targets. Given the shift in valuations, we have turned more constructive on the US 10-year Treasury for the first time since November 2023. We see scope to benefit from its yield, and it could also offer protection if growth disappoints and our pro-cyclical outlook is tested. We remain cautious on US investment-grade corporate bonds because the tightness spreads, giving less cushion if the economic backdrop weakens late in the cycle.
Equity valuations continue to look stretched, but we remain positive due to a supportive economic backdrop and earnings momentum. We are less positive on US technology, while recognising that technology still makes up a significant share of global equity markets and has been a major driver of returns, particularly within the MSCI World Index. We remain constructive on energy and mining shares, supported by ongoing geopolitical tensions and the increased focus on securing resilient supply chains.
In currencies, we maintain a neutral view on the US dollar and have not implemented any direct dollar positions. However, we remain constructive on emerging market debt, which should be supported if the US dollar does not strengthen further. We also see a tactical opportunity for the Japanese yen to outperform the Canadian dollar, given the potential for the Bank of Japan to continue moving interest rates and policy settings back towards more normal levels.
All in all, we still lean towards a view that the economy can keep growing and that more growth-sensitive assets should be supported. The main risks to our view stem from the potential for inflation to surprise on the upside and the concentrated nature of equity returns.
🟢 Long / positive
🟡 Neutral
🔴 Short / negative
🔼 Up from last month
🔽 Down from last month
Main Asset Classes
🟢 Equities
We remain positive on equities. Earnings momentum continues to support a resilient outlook. While technology drives growth, improving cyclical sectors broaden support, although elevated valuations warrant greater selectivity.
🟢🔼Government bonds
We have tactically upgraded government bonds to positive. Higher real yields and improved valuations have enhanced the opportunity set as rate expectations have become more realistic, supporting a more constructive outlook in the short term.
🟢 Commodities
We remain positive on commodities. Our preference is focused on industrial metals, which continue to benefit from resilient global growth, infrastructure investment and AI-driven demand.
🔴 Corporate bonds (credit)
We maintain our negative view on credit. Spreads remain tight, while medium-term risks from weaker fundamentals and refinancing pressures continue to warrant caution.
Equities
🟢 US
Continued profit growth supports our positive view on US equities. The technology sector is the main source of earnings growth, but domestic fiscal stimulus is helping cyclical sectors and broadening support. Elevated expectations for large-cap technology warrant greater selectivity.
🟡 UK
While financials, energy and materials should benefit in the current environment, on balance we see more upside potential in other regions.
🟢 Europe ex UK
Attractive valuations, resilient earnings and a higher-for-longer rate environment continue to support European financials. We continue to see opportunities outside the narrow AI leadership theme.
🟡 Japan
Improving domestic conditions are underpinning the market, although uncertainty around the pace of policy normalisation and currency volatility continue to temper conviction.
🟢 Global Emerging Markets (EM)1
Resilient earnings and continued technology investment are the main drivers of emerging equities, although a more mature cycle and high concentration risk argue for a greater focus on stock selection.
🟢 Asia ex-Japan: China
Our positive view remains focused on those technology sectors benefiting from AI-related investment and digital adoption trends.
🟢 EM Asia ex China
AI-driven demand for semiconductors continues to support the region, but as the market matures it becomes more important to be selective and focus on individual companies.
1Global Emerging Markets includes Central and Eastern Europe, Latin America, and Asia.
Government bonds
🟢🔼 US
Higher real yields and improved valuations have increased the attractiveness of US Treasuries as market expectations for policy rates have become more realistic. Our positive view reflects improved valuations rather than expectations of a significant deterioration in economic growth.
🟡 UK
Attractive yields continue to be balanced by inflation uncertainty and evolving policy expectations, leaving us neutral.
🟡 Europe
Inflation risks and a balanced risk-reward profile leave us neutral despite attractive yields in parts of the market.
🟡 Japan
Rising inflation expectations and uncertainty over the pace of monetary policy normalisation continue to create uncertainty around the outlook for yields.
🟡 US inflation-linked bonds
Inflation risks remain elevated, although current pricing reflects much of the near-term outlook.
🟢 Emerging markets local currency bonds
Attractive real yields and carry continue to support local currency emerging market debt across a number of regions.
Investment grade credit
🟡🔼 US
The view on US investment-grade credit is now neutral. While spreads remain relatively tight and medium-term risks from refinancing and weaker fundamentals persist, market positioning suggests a more balanced risk‑reward outlook.
🟡 Europe
Spread levels remain relatively tight and offer limited compensation for a more challenging macro backdrop, leaving us neutral overall.
🟡 Emerging markets USD
Company fundamentals look supportive, but tighter borrowing conditions and geopolitical uncertainty offset this. Current valuations point to a neutral view.
High yield bonds (non-investment grade)
🔴 US
Current valuations offer only limited extra return to cover refinancing risks and the chance that company finances weaken. Defaults are still low, but higher interest rates are likely to put more pressure on borrowers over time.
🔴 Europe
Valuations offer limited cushion if company finances weaken and borrowing conditions tighten.
Commodities
🟢 Energy
Tight supply conditions and increased geopolitical uncertainty continue to support the sector, while energy also provides an effective hedge against renewed Middle East disruption.
🟡 Gold
Gold continues to provide diversification benefits, although our conviction has moderated as industrial metals offer stronger cyclical support.
🟢 Industrial metals
Industrial metals look well supported by steady global growth, infrastructure spending, and rising electricity and grid investment linked to AI.
🟡 Agriculture
Improved supply is likely to limit near-term upside, even though longer-term trends remain supportive.
Currencies
🟡 US $
While resilient US growth continues to support the dollar, offsetting positioning in emerging market currencies leaves us with a broadly neutral view.
🟡 UK £
Domestic growth and policy expectations remain broadly balanced.
🟡 EU €
Improving sentiment towards selected sectors is offset by a mixed macroeconomic backdrop.
🟢 CNH ¥
Structural capital flows and continued technology investment support the renminbi over the medium term.
🟢🔼 JPY ¥
Interest-rate differences between Japan and other countries are still a key driver of the yen, but the outlook now looks more evenly balanced. The yen may strengthen against currencies where cyclical and commodity-related risks appear more fully priced.
🟡 Swiss franc ₣
Defensive characteristics remain supportive, but valuation limits further upside.
Source: Schroders, July 2026. The views for equities, government bonds and commodities are based on return relative to cash in local currency. The views for corporate bonds and high yield are based on credit spreads (i.e., duration-hedged). The views for currencies are relative to the US dollar, apart from the US dollar which is relative to a trade-weighted basket.
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