Allianz Global Investors (AllianzGI) expects the market environment to remain challenging in the second quarter of 2026, but remains constructive on global economic developments. On the one hand, recent geopolitical tensions in the Middle East have increased uncertainty and pushed up energy prices, with potentially stagflationary effects on growth and inflation. On the other hand, structural investments continue to support global economic momentum, particularly in the field of artificial intelligence (AI).
 Christian Schulz |
US growth to slow
According to Chief Economist Christian Schulz, the year started stronger than expected, but growth in the United States is likely to weaken: “Following a surprisingly strong start to the year, we expect US growth to cool by mid-2026.” Due to higher energy prices, inflation is expected to remain around 3%, above the Federal Reserve’s target. “This is likely to prompt the central bank to cut interest rates later than previously expected,” Schulz adds.
In Europe, moderate growth is expected, with Germany acting as an important driver. At the same time, rising energy prices are keeping inflation elevated. Schulz notes: “Against this backdrop, we consider it likely that there will be no ECB rate cuts this year, and that the bar for rate hikes is low.”
The outlook in Asia is mixed. While growth in China is slowing due to reduced government support, Japan is benefiting from increased fiscal spending. “This is likely to prompt the Bank of Japan to raise interest rates further this year,” says Schulz.
Equities remain attractive
Equities remain attractive for investors, particularly over the long term. According to CIO Equity Michael Heldmann, clear structural trends are emerging: “Europe’s push for greater strategic autonomy — particularly in defence, but also in energy, digitalisation and healthcare — is becoming a globally relevant investment theme.” He also points to the vulnerability of energy supply chains, which has once again been highlighted by recent geopolitical tensions.
Technology also remains a key growth driver. Heldmann emphasizes: “AI is and remains a major theme in global equity markets.” He sees particularly strong growth in demand for semiconductors, data centres and energy infrastructure.
On bond markets, selectivity is becoming increasingly important, according to CIO Fixed Income Jenny Zeng. “In an increasingly volatile environment, markets are rewarding selectivity,” she says. The combination of inflation and rising risk aversion creates a mixed picture, prompting investors to focus on quality and strong balance sheets. She currently views government bonds from Japan and the UK as relatively attractive.
Opportunities in emerging market bonds
Despite volatility in equity markets, corporate bonds have remained relatively stable. “Within corporate bonds, euro investment-grade continues to offer the best value,” says Zeng. She also sees opportunities in emerging markets, particularly in Asia due to relatively low volatility.
When it comes to overall asset allocation, a long-term focus on equities remains justified, according to CIO Multi Asset Gregor Hirt, although more caution is warranted in the short term. “While we remain constructive on equities over the long run, we are more cautious in the short term, as the risk premium from the Middle East conflict tempers our conviction,” he explains.
According to Hirt, Europe, Japan and emerging markets remain more attractively valued than the United States. He also continues to see an important role for commodities. “Gold remains a core long-term position,” he says, while copper is benefiting from strong demand.
Finally, he stresses the importance of flexibility: “Investors should keep some ‘dry powder’ to take advantage of opportunities created by market volatility.”
In short, uncertainty has increased, but there are still plenty of opportunities. In this environment, it is important to maintain a clear long-term vision and a well-diversified portfolio.
