In a monthly update from the Schroder the multi-asset investment team, say that recent US labour market strength suggests a low recession risk, while supportive growth and earnings momentum keep us constructive on equities despite inflation risks.
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.
You can access the full June 2026 multi-asset view from Schroders here: Our multi-asset investment views – July 2026
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