The fall in oil prices and monetary policy will set the course. Columbia Threadneedle highlights the four key factors that will define the evolution of the markets in the coming months.
The first half of 2026 has been turbulent for the markets, with geopolitical tensions testing growth and inflation forecasts. Now, analysts at Columbia Threadneedle Investments believe that the second half will bring some calm, although not without risks. The main relief, according to the manager, is the drop in oil prices, but there are three other drivers that investors should not lose sight of.
Monetary Policy: The Dominant Factor
For Anthony Willis, senior economist at Columbia Threadneedle, monetary policy will be the main driver. In the United States, the economy remains resilient and the Federal Reserve (Fed) has hardened its tone. "As investors reconsider whether the Fed may need to raise rates again, market prices will continue to be sensitive to data and central bank communication," he explains.
In this context, volatility will be a constant companion. Any sign of persistent inflation or economic weakness could reignite fears of further rate hikes, affecting equities and bonds.
Oil: The Relief from the Middle East
The second driver is the price of oil. Following disruptions in the Persian Gulf, crude oil has begun to flow back into global markets. "This is a constructive development for growth and inflation expectations," notes Willis. However, he warns that the process will not be smooth: production centres in the Middle East need time to regain momentum, and supply chains are still affected by shipping issues.
The manager estimates that Brent crude could stabilise between $70 and $80, with a geopolitical risk premium factored in. Negotiations between the United States and Iran regarding the nuclear deal will add more ups and downs. "Six days of negotiations is an ambitious timeline for such a complex issue," Willis quips, making it clear that headlines will move the markets.
Corporate Profits and Artificial Intelligence
The third factor is corporate profits. With the second quarter earnings season underway, investors will be looking for signs that the investment cycle in artificial intelligence (AI) continues to bolster profits. "Capital spending linked to AI has been an important source of growth momentum, especially in the U.S. and Southeast Asia," points out Willis.
The million-dollar question is whether companies will be able to monetise that investment and generate attractive returns. Expectations are high, making corporate earnings a potential source of volatility. Any disappointment could punish tech stocks and drag down the overall market.
Political Risk: Elections and Government Changes
The fourth driver is political risk. In the UK, markets are closely watching the transition to a new Prime Minister and their ability to push a growth agenda without breaking fiscal rules. In the United States, the midterm elections will reshape the economic landscape. "A drop in gasoline prices would be favourable for Republicans, but current expectations suggest that Democrats could gain ground," comments Willis.
If Democrats manage to control one or both chambers, President Trump may find it more difficult to advance his initiatives, adding tension to an already polarised landscape. For investors, this means that politics will remain a factor of uncertainty, with potential fluctuations in sectors such as energy or healthcare.
In summary, the second half appears somewhat more constructive than the first, but not without jolts. The drop in oil prices provides some relief, but monetary policy, corporate earnings, and political noise will require constant attention. Investors would do well to keep their portfolios diversified and prepare for volatility.
You may also like
