Edmond de Rothschild AM places investment in smaller European companies ('small caps') at the forefront due to their key role in industrial value chains, and favors corporate debt as the cornerstone of its strategy for the second half of 2026.
In its outlook for the second half of the year, the asset manager highlights that Europe is benefiting from "a new wave of investment" supported by four major structural supercycles: artificial intelligence (AI), electrification, infrastructure, and defense.
In this environment, where companies less tied to the traditional economic cycle are gaining weight, Edmond de Rothschild AM emphasizes that "this context is particularly favorable for small and mid-caps, which tend to have less analyst coverage and occupy strategic positions within industrial value chains."
In the United States, the firm anticipates that the Federal Reserve may raise interest rates once or twice "before March 2027," given that inflation will "predictably" remain above the 2% target at the close of both the current and next year.
Against this backdrop, the asset manager maintains a neutral stance on US sovereign debt and a clear preference for corporate fixed income, "provided that the risk of recession does not increase significantly."
Risk of Selective Stagflation
In its roadmap for the second half of the fiscal year, Edmond de Rothschild AM believes that the focus of risk has shifted: it no longer fears a global recession as much, but rather "the emergence of selective stagflation episodes affecting certain sectors and regions."
Regions such as the Eurozone, China, and, to a lesser extent, the United Kingdom show symptoms of this scenario "as a consequence of a succession of supply-side disruptions," while the United States maintains growth close to 3% supported by the strength of private demand and the investment cycle linked to AI development.
The entity warns, however, that consumption resilience "depends largely on higher-income households," as the top 10% with the most wealth accounts for nearly half of total spending.
"As a consequence, consumption could be affected by a significant correction in financial markets, with the consequent impact on aggregate demand," the asset manager points out.
Concentration of Resources and Chipflation
The firm also emphasizes the so-called 'chipflation', that is, the inflationary pressure derived from the scarcity and rising cost of semiconductors, which is increasing costs and prices in different segments of the US economy.
Part of this scarcity is due to strategic resources "being increasingly concentrated in a small number of players and regions." As an example, Edmond de Rothschild AM mentions TSMC, responsible for more than 90% of the world's most advanced chips, and recalls that China accounts for around 70% of global rare earth production.
At the same time, the asset manager warns of the lack of capacity in the electricity grid in a context where data centers "are significantly driving up electricity demand."