Monthly House Views - Pressure on interest rates - May 2026
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A common concern: the return of inflation
The persistence of the blockade of the Strait of Hormuz and tensions in oil prices have recently been followed by new tensions in interest rates. This rise, visible on both sides of the Atlantic, reflects concern about the return of inflation risks linked to rising energy prices and the prospect of persistently restrictive monetary policies. However, this apparent synchronisation masks differing economic realities.
Different stories
In the United States, the economic backdrop appears significantly more robust, supported by a re-accelerating labour market, an accommodative fiscal policy and the rise of AI. The energy shock is thus adding to already existing pressures, increasing the risk of persistent inflation that could justify further monetary tightening by the Federal Reserve. In Europe, the rise in energy prices is occurring in a much more fragile macroeconomic context. Activity remains constrained by weakening domestic demand, a sluggish industrial cycle and financing costs that are already weighing on economic agents. Expectations of significant tightening by the ECB therefore appear overstated.
A positive short-term view on the dollar
In this context of concerns over higher inflation but resilient activity, we maintain our preference for equities over bonds. However, we remain more exposed to US equity markets relative to European markets, due to differing cyclical dynamics between the two regions. Furthermore, we now expect a more favourable move in the US dollar in the short term, driven by an adjustment in monetary policy expectations. Finally, we maintain a positive view on the AI sector, particularly in Asian markets. We are reducing our exposure to the Chinese equity market in order to favour emerging markets that are more exposed to this sector, in a context of slowing Chinese activity.
Current investment themes
Energy independence remains a long-term strategic pillar, supported by substantial investment in infrastructure and security of supply. Industrial metals continue to benefit from the energy transition, electrification and growing demand linked to AI. Finally, in an environment of persistently higher interest rates, carry strategies are becoming more attractive, offering an additional source of yield and stability in portfolios exposed to risk assets.
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By Clémentine Gallès Chief Economist and Strategist Societe Generale Private Banking and Juan Carlos Mendoza Diaz...
By Clémentine Gallès Chief Economist and Strategist Societe Generale Private Banking and Juan Carlos Mendoza Diaz...
By Clémentine Gallès Chief Economist and Strategist Societe Generale Private Banking and Juan Carlos Mendoza Diaz...
By Clémentine Gallès Chief Economist and Strategist Societe Generale Private Banking and Juan Carlos Mendoza Diaz...