This is the conclusion from the June edition of the monthly allocation report from Storebrand AM’s Tactical Allocation Team, led by Olav Chen, Head of Allocation and Global Fixed Income.
Rate hike expected in the euro area
Three months after the attack on Iran, the Strait of Hormuz remains, in practice, largely closed. Despite this, oil prices have declined noticeably during May, as markets increasingly price in a reopening and a recovery in supply.
Negotiations between the United States and Iran appear to be ongoing, although the ceasefire has been breached at times and signals from the parties have fluctuated. In both the US and Europe, prices – particularly fuel prices – have begun to rise, pushing inflation expectations higher.
The ECB’s GDP growth forecast for the euro area in 2026 has been revised down from 1.2% to 0.8% over the past two months. Nevertheless, the central bank is expected to raise rates at its 11 June meeting, marking the first increase since 2023. A full reopening of the Strait and oil prices returning to pre-conflict levels of around USD 60–70 per barrel would be required to alter this outlook – something few expect in the near term.
“Inflation expectations have remained elevated for some time. Higher energy prices are likely to push the ECB towards a rate hike in June, despite weaker growth prospects,” says Olav Chen, Head of Allocation and Global Fixed Income at Storebrand AM.
G2 dynamics and “strategic stability”
The May summit between Donald Trump and Xi Jinping was well received, both economically and politically. Agreements reportedly include increased US exports – spanning aircraft, agricultural goods and commodities – ahead of the US midterm elections, alongside the establishment of new bilateral bodies to manage economic tensions.
Xi is expected to visit the United States later in September, with additional meetings planned throughout the year. The term “strategic stability” has featured prominently in communications, even as structural rivalry between the two powers persists.
Overall, the risk of escalating geopolitical tensions between the United States and China appears to have moderated in the near-term.
Equity markets continue higher
Global equity markets progressed further in May, reaching fresh record levels. MSCI World rose 5% in local currency terms, supported by declining oil prices, expectations of a reopening of the Strait of Hormuz, and renewed momentum in AI-related sectors. The earnings season has now concluded, with the United States in particular delivering positive surprises.
Emerging markets stood out, rising 10% during the month – nearly 15 percentage points ahead of developed markets year-to-date. The AI theme is increasingly global: South Korea, driven by companies such as Samsung Electronics and SK Hynix, has risen around 300% over the past twelve months, while Taiwan is up around 130%. Storebrand AM has taken further profit but remains overweight in both global equities and emerging markets.
“The AI theme is broadening into Asia in a way few expected. Supply constraints in AI-related components are giving Korean and Taiwanese companies a position comparable to the US-dominated cloud sector,” says Chen.
Rates and credit
Global government bonds moved modestly higher in May. Yields continue to track oil prices and inflation expectations, with markets increasingly pricing in a more hawkish stance from central banks.
Storebrand AM remains neutral in duration across all markets and maintains an overweight position in credit and corporate bonds. Credit spreads tightened further during the month, reflecting improved risk appetite.
Asset allocation overview Storebrand AM – June 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)