Bhaskar Laxminarayan, chief investment officer Asia and Middle East at Swiss private bank Julius Baer and Mark Matthews, head of research Asia at Julius Baer, discuss the mid-year 2026 outlook, noting that global equities have remained resilient, despite the challenges, with AI remaining a key trend.
“At the start of the year, markets anticipated moderating
inflation and the beginning of central bank rate cuts. More
recently, renewed geopolitical tensions in the Middle East pushed
oil prices sharply higher and temporarily lifted inflation
expectations,” Bhaskar Laxminarayan, chief investment officer
Asia and Middle East at Julius Baer, said this
week.
Yet financial markets have remained resilient and global equities
have reached new highs, supported by solid corporate earnings and
ongoing investment activity. The firm remains positive on
equities in 2026, notably US and Asian ones, AI and gold.
In his view, the environment is reinforcing a structural shift
towards higher investment needs across defence, energy,
artificial intelligence, and supply chain resilience. After years
of abundant global savings weighing on bond yields, demand for
capital is now rising more visibly. “In short, periods of market
volatility should continue to be viewed as opportunities to
redeploy cash and remain invested,” he said.
Equities
Mark Matthews, head of research Asia at Julius Baer emphasised
how equities have rebounded since March on strong earnings,
easing geopolitical concerns, and AI momentum. “While the US has
regained leadership, opportunities are broadening across regions.
With sentiment improving but not excessive, a balanced and
selective approach remains appropriate for the second half of
2026,” Matthews said.
“We have a constructive global stance on equities. In the US, we
favour AI-related sectors with strong earnings momentum. This
supports US equities, while Asia – China and Japan, specifically
– forms an integral part of the AI value chain,” he continued.
Matthews remains constructive on Asian equity markets, given
their role in the AI supply chain. He favours North Asia
– Japan, South Korea, China. In South Asia, he prefers
Singapore and India for country-specific reasons. “India remains
attractive with longer-term upside, and Singapore and Switzerland
offer defensive strength,” he said.
Within Asia, he believes that opportunities remain broad but are
becoming increasingly differentiated. “Japan stands out as a key
beneficiary of AI optimism, underpinned by strong earnings
revisions and ongoing corporate governance reform,” he added.
In emerging Asia, Matthews believes that China remains a key
allocation. Beneath the surface, AI-related segments –
particularly onshore – have shown strong momentum.
Matthews highlighted that AI remains the dominant market
driver: “The investment cycle continues to accelerate,
supported by strong capital expenditure and rising demand for
data centre capacity, while signs of monetisation are reinforcing
earnings growth.”
He upgraded the communications sector to overweight, reflecting
both accelerating monetisation among internet platforms and the
defensive characteristics of telecommunications operators.
“Financials remain attractive due to compelling valuations and
strong capital returns, while healthcare offers further
diversification through innovation and structural growth,” he
said.
Fixed income
“By mid-2026, hawkish central bank expectations are priced in,
making yields more attractive. High-quality bonds may benefit as
oil prices ease, supporting an overweight duration stance,”
Matthews said.
Julius Baer’s fixed income research team favours extending
duration in bond portfolios if and when 10-year US Treasuries
trade around 4.5 per cent, and trimming again as yields move
towards 3.5 per cent.
“Investment-grade corporate bonds look attractive, supported by
healthy balance sheets,” Matthews said. “Alongside this,
emerging market bonds in hard currencies and select emerging
market local-currency debt remain a useful diversifying element,
offering access to higher real yields.”
Gold and oil
Similar to a number of wealth managers, Laxminarayan has a
preference for gold, which remains supported by structural
central bank demand and safe-haven buying. Over the longer term,
he believes that gold’s fundamentals remain supportive.
He expects oil prices to moderate during the second half of 2026,
while the global economy is adjusting to the energy shock without
further escalation.
Alternative investments
Laxminarayan highlighted that private markets are seeing
moderating activity amid higher interest rates and valuation
uncertainty. Thus, manager selection remains critical. In private
equity, he favours managers with strong execution and operational
value creation. In private debt, especially European direct
lending, he believes that it remains attractive for its yield,
diversification potential, and floating-rate exposure.
“Private infrastructure provides downside protection and
differentiated performance, with exposure to structural demand
from AI, the energy transition, and reshoring,” Laxminarayan
said. “Multi-strategy hedge funds are well positioned to capture
dispersion, dynamically allocate risk, and manage drawdowns.
Laxminarayan believes that geopolitics, policy errors, AI
overspend, credit stress, trade tensions, and leverage are
significant risks. “Periods of geopolitical stress and energy
shocks may continue to influence inflation expectations and
market volatility,” he said.