Our assessment for April has broadly played out as expected. The potential worst-case scenario – attacks on Iranian infrastructure or a further escalation of the conflict – did not materialize. The anticipated rebound unfolded, supported by improving sentiment and the previously cautious positioning of many market participants. The investment case surrounding AI and data center infrastructure also remains intact. Hyperscalers once again expanded their capital expenditures. As a result, selected technology, AI, industrial and utility stocks performed very strongly. Overall, major equity markets staged a robust recovery in April. At the sector level, technology stocks were the clear global outperformers, while oil & gas as well as pharmaceutical and healthcare stocks lagged behind. In Europe, banks, media and industrials also saw solid demand.
Medium term, we remain constructive. Looking ahead to the current month, the well-known “Sell in May” pattern is likely to come into play only in the event of renewed escalation in the Middle East. We continue to expect no recession in the US. Current recession probability stands at around 26%. At the same time, US industry remains resilient, supported by reshoring, data center investments and semiconductor fabrication plants. Companies with strong exposure to the US industrial sector continue to report exceptionally strong optimism. Against this backdrop, the US remains attractive on a relative basis.
Earnings trends further support this view. First-quarter earnings season delivered strong profit growth, particularly in the US. So far, no negative earnings revisions are visible at the sector level. Margin expansion and improving profitability across the broader US equity market remain intact.
The positive momentum surrounding AI and data center infrastructure is also likely to continue. According to Morgan Stanley, hyperscaler investments are expected to reach around USD 800 billion in 2026. This suggests that capital flows into this segment should remain strong.
At the same time, the picture of a K-shaped economy persists. Higher-income consumer segments continue to perform well. Retail sales still show no signs of weakening consumption, while household debt levels remain below pre-pandemic levels.
Europe, by contrast, continues to show weak economic momentum. In addition, a specific seasonal risk is emerging: the aviation sector’s heavy dependence on jet fuel imports from the Middle East could lead to supply bottlenecks during the summer travel season.
Opportunities we see:
Technology, semiconductors and AI: Hyperscaler investment levels remain exceptionally high. South Korean memory chip manufacturers and Taiwanese technology stocks continue to demonstrate pronounced relative strength. Against this backdrop, selected technology, semiconductor and AI-related equities remain attractive.
Energy: Global inventories continue to decline, while US oil exports have reached record highs. At the same time, strong earnings growth is expected for the energy sector within the broader US equity market in 2026. The sector therefore remains promising.
Asia: Asian equities have delivered strong performance since the start of the year. The region remains one to monitor closely.
US industrials / reshoring: Data centers, semiconductor fabs and reshoring trends continue to drive US industrial activity. Selected industrial companies could benefit accordingly.
Fixed income: In our view, bonds with medium-duration maturities remain attractive.
Iran deal: Over the medium term, some form of agreement appears likely, as Iran would risk losing its most important source of revenue without oil exports. This could ease both oil prices and geopolitical tensions.
Risks we are monitoring:
Oil prices: If spot oil prices remain sustainably elevated, this would likely weigh on equity markets, particularly in Europe. Historically, sharp year-over-year increases in oil prices have often been problematic for both economic growth and capital markets.
Iran / geopolitics: Markets are currently pricing in only limited confidence regarding a near-term normalization of shipping traffic through the Strait of Hormuz. Should this normalization take longer than currently expected, energy prices could remain elevated for an extended period.
Trade policy / tariffs: The recent increase in US auto tariffs is currently being interpreted more as leverage in negotiations with the EU than as the beginning of a new trade war. However, should retaliatory tariffs be introduced, recession risks in Europe would rise significantly.
European economy: The European economy remains weak. In addition, the risk of jet fuel shortages during the summer remains elevated. Europe is considered particularly dependent on relevant imports. If trade tensions were to escalate further, recession risks – especially in Germany – would likely increase.
Healthcare: The sector has recently shown weak performance in both Europe and the US, leaving it technically fragile for the time being.
Inflation / interest rates: Inflation is likely to edge higher. At the same time, the US Federal Reserve continues to maintain a relatively hawkish tone in its communication. As a result, further rate cuts have largely been priced out by the market.
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