Geneva-based private bank Lombard Odier is in risk-on mode with a preference for emerging market equities, despite a volatile backdrop caused by the Middle East conflict.
Lombard Odier remains moderately pro-risk with expectations of equities continuing to outperform bonds, according to the June edition of its cross-asset publication, “Investment Strategy Monthly”.
Within its overweight position on equities, it prefers emerging markets based on three pillars. First, it anticipates earnings growth to accelerate meaningfully relative to developed markets. Second, valuations have fallen toward long-term averages. Third, investor flows indicate renewed interest after the recent sell-off, particularly in Asia. While gains have been concentrated in South Korea and Taiwan thus far, the bank believes that performance will broaden as the macroeconomic environment improves and investors seek catch-up potential in markets like China.
In the first five months of 2026, the MSCI Emerging Markets Index is up nearly 34%, compared to the 21% gain from the MSCI World Index.
In addition, Lombard Odier maintains a neutral stance on global fixed income while continuing to favour emerging market debt. Within currencies and commodities, it holds an overweight position on gold with 12-month target of USD5,400 per ounce and a negative view on the US dollar.
Strait of Hormuz: Gradual reopening
One of the major risks to consider for markets has been the effect of energy prices from the Middle East conflict and according to Lombard Odier’s global chief investment officer Michael Strobaek, the impact has been “much more muted” than expected due to two factors: a weaker relationship between the oil and gas market to electricity costs, reflecting substantial investments in alternative energy, and robust corporate earnings due in large part to capital expenditure in artificial intelligence.
“Our base case in the Middle East remains a gradual reopening of the Strait, given strong incentives for the major powers – including US and China – to ease disruptions to trade. In addition, I think that strong earnings, fiscal support, and non-restrictive monetary policy provide the buffers for a manageable outcome,” Strobaek commented. “This all underpins our House View, and moderately pro-risk portfolio stance.”
