AllianzGI advises investors to maintain conviction amid market uncertainty

Allianz Global Investors (AllianzGI) sees markets as “bending but not breaking”, urging private investors to prioritise long-term diversification, quality assets and artificial intelligence (AI)-driven equity themes amid geopolitical and inflationary uncertainty.

AllianzGI expects the market environment to remain challenging in the second quarter of 2026, but remains constructive about global economic developments. On the one hand, recent geopolitical tensions in the Middle East have increased uncertainty and driven up energy prices – with potentially stagflationary effects on growth and inflation. On the other hand, structural investments continue to underpin global economic momentum, particularly in the field of AI.

As outlined in the latest House View Q2 2026, AllianzGI expects the global economy to remain one of “bending but not breaking”, despite the recent uncertainty. At present, oil prices in the range of $90 to $110 appear manageable. However, if such price levels persist for an extended period, they could weigh on both growth and price stability. In this environment, AllianzGI is focusing on diversification in long-term portfolios, with an emphasis on quality carry and equity themes aligned with strategic autonomy and AI. With regard to the US dollar, AllianzGI remains fundamentally cautious, despite short-term gains as a safe haven.

Stagflationary trends influence central bank policy

Christian Schulz, chief economist at AllianzGI, assesses the macroeconomic developments: “Following a surprisingly strong start to the year, we expect growth in the US to cool off by mid-2026. Higher energy costs are likely to keep inflation at around 3%, and thus once again above the US Fed’s 2% target. This is likely to prompt the central bank to cut key interest rates later than previously expected, to around 3.5% by the end of 2026.”

For Europe, Schulz expects moderate growth of 1% to 1.5% in 2026, with positive momentum from Germany. At the same time, rising energy prices are likely to push inflation in the eurozone above the European Central Bank’s (ECB) 2% target. “Against this backdrop, we consider it likely that there will be no ECB interest rate cuts this
year, and a low bar to hikes,” said Schulz.

Finally, in Asia, the economic outlook remains mixed. Schulz: “Whilst fiscal growth stimuli are waning in China, Japan is benefiting from additional government spending. This is likely to prompt the Bank of Japan to raise interest rates by a further 50 basis points this year.”

Strategic autonomy, energy and AI as key drivers

With regard to equity investments, Michael Heldmann, CIO, equity, highlights thematic trends: “Europe’s push for greater strategic autonomy – particularly in defence, but also in energy supply, digitalisation and healthcare – is gaining tremendous momentum and is developing into a globally relevant investment theme. At the same time, the
recent escalation in the Middle East highlights how vulnerable energy supply chains remain. Related sectors stand to benefit from this.”

Heldmann also continues to see strong structural drivers in the technology sector. “AI is and remains a key theme in global equity markets. China is accelerating AI adoption and global demand for semiconductors, as well as energy infrastructure such as grids and data centres is rising significantly.” In terms of valuations, Japan and the UK remain
the most attractive markets from AllianzGI’s perspective.

Jenny Zeng, CIO, fixed income, warns of widening dispersion in bond markets: “In an increasingly volatile environment, markets are rewarding selectivity. Oil-price-driven inflation and rising risk aversion create mixed signals for bonds. Against this backdrop, market participants should focus on quality carry, balance-sheet strength and active
duration management. Sovereign bonds from Japan and the UK, followed by US Treasuries, appear relatively attractive to us in this context.”

With regard to corporate bonds, Zeng highlighted that this segment has proved remarkably stable despite increased equity market volatility. “Within corporate fixed income, euro investment grade bonds continue to screen as the best value, although US investment grade has narrowed the gap compared with the previous three months. Furthermore, emerging market bonds may offer resilient returns and diversification benefits. Asian bonds stand out in particular due to lower volatility.”

Multi-asset: equities based on long-term conviction, selected commodities

Gregor MA Hirt, CIO, multi asset, paints the following picture for asset allocation: “Whilst we remain constructive on equities over the long run, we are more cautious in the short run, as the risk premium from the Middle East conflict tempers our conviction. In terms of valuations, Europe, Japan and emerging markets remain more attractive than the US. Meanwhile, we remain convinced of the merits of commodities – with gold remaining a core long-term conviction and an overweight in copper as supply lacks robust demand. Finally, in foreign exchange and in light of the geopolitical situation, we recommend a tactical, flexible approach to US dollar exposure. Investors should also generally keep some “dry powder” to capture entry points created by volatility in the coming months.”

Re-disseminated by Wealth and Society