This is the conclusion from the July edition of the monthly allocation report from Storebrand AM's Tactical Allocation Team, led by Olav Chen, Head of Allocation and Global Fixed Income.
Oil back towards pre-conflict levels
Brent crude fell back towards USD 70 per barrel towards the end of June – the levels seen before the Iran war broke out and the Strait of Hormuz was closed – having peaked at USD 120 when fears were at their highest. Traffic through the Strait has yet to fully normalise, and no peace agreement has been signed, although negotiations around a memorandum of understanding (MOU) have been ongoing for some time, with repeated interruptions. Financial markets nevertheless continue to price in a peace agreement and a reopening of the Strait.
In the United States, petrol prices have fallen below USD 4 per gallon, down from USD 4.5, and are likely to decline further. US petrol consumption peaks between May and August – the so-called “driving season”.
“Lower oil and petrol prices in the middle of the US driving season mean lower expenses for American households and more purchasing power than feared only a few months ago,” says Olav Chen, Head of Allocation and Global Fixed Income at Storebrand AM.
Central banks resume tightening
The decline in oil prices has not stopped central banks from raising interest rates. Inflation prospects rose through the second quarter, and the European Central Bank (ECB) raised rates in June for the first time since 2023, with markets pricing in one further hike this year.
The US Federal Reserve also signalled potential rate hikes ahead at its latest meeting, with upward revisions to the so-called “dot plots”. Newly appointed Fed Chair Kevin Warsh, however, declined to submit a dot of his own, reflecting his scepticism towards forward guidance. His rhetoric on price stability was nonetheless clear and was interpreted as hawkish by markets, which currently price in a rate hike in late October and the possibility of another over the next twelve months.
“Even though oil prices have fallen, that has not stopped the central banks. The rhetoric from the new Fed Chair was firmly focused on price stability – this is not a central bank following any political agenda for lower rates,” says Chen.
SpaceX delivers a record IPO
Equity markets have so far taken the prospect of higher rates in stride, even though rising rates have historically weighed on economic growth and corporate earnings expectations. Long-term yields have risen less than short-term yields, not least because markets view the oil price effect on inflation as transitory. Nor did it stop a successful listing of SpaceX in June – the largest IPO in history, raising nearly three times as much capital as the previous record-holder, Saudi Aramco in 2019, and once again making Elon Musk the world's richest person. For now, Starlink is the main profit generator, while Starship (space) and xAI (AI and data services) represent important long-term goals to justify the valuation. Later this year, the much-discussed Anthropic – the company behind Claude – is also expected to go public.
Equity markets – overweight
Global equities, measured by MSCI World in local currency, rose 10% in the first half, despite volatility driven by oil prices and geopolitical tensions. The energy and technology sectors were the strongest performers, gaining almost 20%. Emerging markets rose a full 25% – well ahead of developed markets – with South Korea and Taiwan contributing strongly, up 132% and 61% respectively, while China and India detracted. With the AI-led rally, EM equities now offer less diversification and may add to AI concentration in portfolios. The second half is likely to be shaped by the run-up to the US midterm elections and potential further central bank tightening. Storebrand AM remains overweight in both global equities and emerging markets.
Rates and credit
Global government bonds (JPM GBI) were broadly unchanged in the first half. Japan detracted, falling almost 3% on the back of rising yields, while Germany and the euro area contributed around 1% and the US was marginally positive. Credit spreads widened somewhat in June but remain close to the levels seen at the start of the year, despite the volatility of the first half. Storebrand AM remains neutral in duration across all markets, maintains an overweight position in credit and corporate bonds, and is underweight in money market instruments.
Asset allocation overview Storebrand AM – July 2026
- Global equities: Overweight (unchanged)
- Norwegian equities: Neutral (unchanged)
- Swedish equities: Neutral (unchanged)
- Emerging market equities: Overweight (unchanged)
- Global government bonds: Neutral duration (unchanged)
- Norwegian government bonds: Neutral duration (unchanged)
- Swedish government bonds: Neutral duration (unchanged)
- Credit and corporate bonds: Overweight (unchanged)
- Money market: Underweight (unchanged)