Volatile markets, resilient companies: lessons from a tense half-year

Conflict in the Middle East, equity market rebound, a new head at the Fed: the first half of 2026 has been full of surprises. Pierre-Henry Oger, Head of Investment Management and Funds Coordination, looks back on these six turbulent months and provides the keys to understanding what really happened

Conflict in the Middle East, volatility, geopolitical tensions: what is your assessment of this first half?

The first half of 2026 will be remembered. The trigger? The conflict between the United States and Iran, which put financial markets under intense pressure from the very start of the year.

The first consequence was a surge in oil prices. The reason: the Strait of Hormuz, through which around 20% of global oil supply usually passes, was blocked. Markets immediately panicked. Equities fell, interest rates spiked—mechanically reducing bond values.

But once the dust settled, reality proved less dramatic than expected. A large part of oil flows was rerouted, notably via pipelines. In the end, only 5–6% of global production was effectively disrupted. And above all, our economies are now far less dependent on oil than they were in the 1970s.

The initial panic quickly gave way to a rebound: equity markets recovered, supported in particular by strong corporate earnings, especially in the technology sector. S&P 500 companies reported an average 27% increase in earnings in the first quarter. And while Donald Trump lived up to his reputation for unpredictability, an agreement eventually seems to have emerged to end the conflict.

Companies have shown resilience despite this context. How do you explain it?

While the conflict remained geographically concentrated in the Middle East, the rest of the world kept moving—and even performed quite well, particularly among technology giants.

Major cloud and artificial intelligence players—the so-called “hyperscalers”—continued to invest heavily in infrastructure. Hundreds of billions of dollars are poured each year into building data centers and developing AI. These massive investments are reflected in the revenues of many companies operating within this ecosystem.

On top of that, governments around the world are spending heavily—even Germany, traditionally very conservative fiscally, has loosened the purse strings. As a result, a significant flow of liquidity continues to support both the real economy and financial markets.

The IPO of SpaceX also generated enthusiasm, and more mega-IPOs are expected by year-end, helping push valuations higher.

A new head at the Fed: what message does this send to savers?

Jerome Powell’s term as head of the U.S. Federal Reserve (the “Fed”) has come to an end. His successor, Kevin Warsh, has taken over and quickly set the tone, with a first Fed meeting held just a few days ago.

His first decision: no change in interest rates—far from what markets had expected at the start of the year. But rising inflation, directly linked to the Middle East conflict, left him little choice.

Kevin Warsh has also changed the Fed’s communication style: gone are broad long-term forward guidance signals, replaced by a more “day-to-day” approach. This allows for real-time policy adjustments as the situation evolves.

Does this environment of high rates and monetary uncertainty change the way you build portfolios?

The short answer: no. Our investment philosophy does not change with interest rates. What changes is how we adjust portfolios.

When rates rise, bond values fall—this is a basic principle of finance. To limit this impact, it is preferable to focus on short-duration bonds (i.e., those maturing soon) and invest in inflation-linked bonds, which provide protection against this effect.

On the equity side, volatility is actually an opportunity: it sometimes allows investors to buy high-quality companies at attractive prices. The key is to remain disciplined, select businesses you understand, and avoid being driven by short-term emotions.

In such an environment, what is the key argument for staying invested?

Exiting the market at the wrong time is probably the most costly mistake an investor can make. The data is striking.
Take the MSCI World Index, which represents major global companies.

Since early 2001, a fully invested investor would have achieved around 400% returns—despite crises, bubbles, pandemics, and conflicts. Impressive.

But missing just the 5 best days over those 25 years would reduce returns to 260%.

Missing the 20 best days? Barely 80%.

The paradox is that these strong rebound days often occur right after periods of intense panic—precisely when many investors have exited the market. Those who step out miss the recovery. “Market timing”—trying to sell at the top and buy at the bottom—may work by chance, but consistently fails over the long term.

ETF or active management: why does the current environment favor stock picking?

ETFs are increasingly popular, and it’s easy to see why: low costs, simplicity, apparent diversification… yet appearances can be misleading.

Take an ETF tracking the S&P 500: it includes the 500 largest U.S. companies. In theory, it is highly diversified. In practice? The 10 largest companies now represent a disproportionate share of the index. Buying an S&P 500 ETF essentially means buying those 10 giants—which are currently quite expensive. The remaining 490 companies, often more reasonably valued and equally attractive, carry very little weight.

Active management, on the other hand, allows investors to look beyond the major indices and uncover opportunities off the beaten path. One of our recent key successes is a South Korean company that does not appear in any major index. Knowing exactly what you invest in—and why—also provides a level of clarity and confidence that ETFs cannot offer.

And looking ahead? Where do you see opportunities in the second half?

We do not favor short-term forecasts, which are often wrong—the first half of the year is clear proof. What we do know, however, is what investors should primarily protect themselves against: inflation.

It may not be spectacular, but it is highly destructive over the long term. In the eurozone, average inflation since 2020 has reached 3.5% per year—equivalent to a 25% loss of purchasing power in just five years. Idle savings lose value without investors even realizing it.

The best hedge against inflation remains equity investment—provided you select companies capable of growing their revenues in line with rising prices, rather than suffering from them. For more conservative investors, inflation-linked bonds also offer a valuable solution.