Investing in a fast-changing world

Financial news is full of an ever-growing list of macro themes: Epic Fury, the Donroe Doctrine, SaaSpocalypse, dedollarization. But in this letter, we are going to go “old school” and focus on growth, inflation, and liquidity to inform how we are investing right now.

On growth, oil prices remaining elevated for an extended period is a significant tail risk with multiple secondary impacts. However, with Brent crude prices currently trading at around USD 100/bbl we have more headroom before negative effects compound. And absent a prolonged energy shock, we believe the global economic and corporate growth backdrop looks solid.

In the US, robust consumer spending, a resilient labor market, and AI-driven investment remain supportive factors. While Eurozone growth is likely to be below trend this year, we believe high levels of consumer savings and low unemployment should cushion activity. In China, first-quarter growth beat expectations, boosted by strong exports. And corporate earnings growth is healthy: After a positive start to the first-quarter earnings season, we expect 17% year-over-year S&P 500 earnings growth for the quarter, and low-double-digit growth for 2026 as a whole.

On inflation, although higher energy prices will boost headline gauges temporarily, we believe markets are currently pricing an overly hawkish outlook for Federal Reserve and European Central Bank policy. In our base case, we do not believe the energy shock is likely to prove sufficiently large, broad, or long-lasting to provoke central banks to hike interest rates. We still expect the Fed to resume cutting rates later this year and the ECB to remain on hold.