Economic outlook
It’s difficult to get a sense of direction on the economy globally at present because there are so many mixed signals being sent our way. On the face of it, the economy in the US, the world’s largest, and a driver of global growth, seems to be performing extremely well, partly due to the huge amounts of money being pumped in by technology companies looking to share in the benefits of the AI revolution. The number of new jobs created in the US in May hit 172,000, more than double what had been predicted.
At the same time, the US-Iran conflict remains centre stage. In recent months it sent energy prices surging due to the stranglehold that the Iranians put on the Strait of Hormuz, a stretch of water vital for the transportation of oil. While there is a ceasefire, albeit shaky, in place, the effect of the conflict on the economy will continue for some time into the future. While prices have fallen to pre-war levels, they remain volatile and a threat to inflation. In the US, cost-of-living pressures also continue to weigh on households, with consumer confidence still weak by historical standards.
Equities
Equity performance over the past year
30/06/2025 – 30/06/2026, local pricing
There is of course huge excitement about the potential for AI to transform the economy through automation and increased productivity, which remains the main driver of continuing gains in stock markets. Across the board, company earnings this year remain robust. As of writing the US S&P 500 index has advanced about 9 per cent so far in 2026 while the technology heavy NASDAQ has climbed 11 per cent. Even in Europe the Stoxx 600 index is 7 per cent higher.
There is however concern that stock market prices may be overextended on the euphoria surrounding AI and related technologies. Recent volatility around high-profile technology listings such as SpaceX is a reminder that companies can be priced for very optimistic outcomes. For investors, the lesson is not to avoid innovation, but to avoid concentrating portfolios around a single narrative where the range of possible outcomes remains very wide.
Bonds
Bond performance over past year
All bonds 1-10 years, 30/06/2025 – 30/06/2026, local pricing
Bond yields are facing upward pressure from two distinct sources. First, with the inflationary outlook becoming more fraught, the prospect for interest rates is very different from the start of the year. A few months back, analysts were predicting rate cuts during 2026. Instead, the ECB added 0.25 per cent to European rates in June. This was targeted to combat the inflationary shock caused by higher oil prices. Higher policy rates influence bond yields but longer-dated yields are also shaped by inflation expectations, growth expectations and the extra return investors demand for lending over longer periods.
A second factor pushing bond yields upwards is concern around the high debt burden being carried by many countries around the world. US national debt now sits at 122 per cent of its annual economic output. As a result, the US 10-year yield has climbed from about 4 per cent in February to 4.4 per cent now. In Europe, the benchmark German 10-year yield has climbed from 2.7 per cent in February, hitting 3.2 per cent in May before falling somewhat to 2.9 per cent.
We expect interest rates to remain at levels higher than those experienced in the first 20 years of this century.
Euro cash
As noted, the ECB increased rates in June and has signalled that they will act in order to maintain inflation at target levels.
Irish commercial property
The Irish commercial property market is expected to slowly transition into a recovery phase in the coming years, supported by improved credit conditions. Demand is likely to be focused on properties with strong environmental qualities.
It remains a difficult asset class due to liquidity concerns and the structural challenge that many properties may require retrofitting to remain competitive.
Commodities
Commodity performance over past year against equities
30/06/2025 – 30/06/2026, US dollars
Commodities have been a winner in the current environment, with the Bloomberg Commodity Index up over 14 per cent year to date.
Hedge funds
Hedge fund performance over past year against equities
30/06/2025 – 30/06/2026, US dollars, hedge funds priced monthly
Some Hedge fund strategies can play a useful defensive or diversifying role, particularly where returns are less dependent on rising equity markets. However, outcomes vary significantly by strategy and manager, and investors need to be comfortable with the associated liquidity, leverage, complexity and fee risks.
Multi-asset funds
Because of the very wide range of investments they hold, they provide useful diversification, and the ability to dynamically shift asset allocation can provide some protection in times of equity market corrections.
Senior loans
These floating-rate sub-investment rate securities offer a premium over cash and are useful for diversifying a portfolio.
In summary, markets remain alert to developments in the Middle East and to the broader question of whether expectations around AI, interest rates and growth have become too optimistic. For investors, the key is not to be swayed by exuberance or short-term sentiment, but to remain disciplined, diversified and focused on long-term objectives. At Acuvest, our role is to navigate these uncertainties on your behalf, balancing opportunity with caution to help safeguard and grow your wealth in a sustainable way.
