In its 2H2026 investment outlook issued on June 19, Standard Chartered’s chief investment office is sanguine about the US stock market despite forecasting the US Federal Reserve Funds interest rate to remain steady, ranging between 3.5%-3.75% for the rest of 2026, with a 25 bps decrease only coming in the first half of 2027.
For context, this interest rate was below 1% for the majority of the period from late-2008 to present when the S&P rose ten-fold. In general, a lower interest rate tends to lead to stronger stock performance.
Stanchart forecasts strong earnings to power the share market and has a target of 7,950 for the S&P 500 index by mid-2027. The bank says it is overweight on global equities, with a preference for US and Asia ex-Japan stocks.
Meanwhile, it sees gold reaching US$5,100 per ounce within the next 12 months. The precious metal is hovering between US$4,100 to US$4,200 currently and has experienced volatility since the start of the year, rising by more than 25% to a record of around US$5,500 in January before declining since then.
On the interest rate, US inflation, economic resilience and a strong jobs market has removed the expectation of rate cuts. The bank believes that core personal consumption expenditure (PCE) inflation will decline towards the Fed’s 2% target by end-2027 as tariff and energy effects fade.
For reference, April’s core PCE inflation rose 3.3% y-o-y. This was the highest since late 2023 and was attributed to energy prices, tariff pass-through and an emerging "techflation" impulse from AI-related software costs.
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Meanwhile, 2Q 2026 economic growth came in at around 2.2% q-o-q on a seasonally adjusted annual rate while payrolls in May beat consensus for the third straight month, with unemployment steady at 4.3%.
The bank gives a 60% probability for the global economy to experience a “soft landing” on the back of the US-Iran interim deal to restart shipping through the Strait of Hormuz within weeks. It believes that this should help the global economy achieve a soft landing and mute long-term inflation expectations, reducing the need for central banks to tighten policy as much as markets are pricing.
Stanchart does express some caution, giving a 20% chance of things getting sour for the economy. In its downside risk scenario, there is a 10% chance of recession caused by a delayed restart of Hormuz shipping, a stock market downturn hurting investor confidence or a bond sell-off due to inflation or debt concerns.
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It also gives a 10% probability of stagflation occurring if the Middle East crisis resumes and oil prices rebound.
Stanchart global chief investment officer Steve Brice says that markets have shown resilience in the first half of 2026 on the back of strong profits and sustained optimism around technology. However, the next six months may require more investor intervention and he hopes the bank’s latest outlook will help clients navigate the evolving investment and economic landscape.
“The second half of 2026 is likely to require more active navigation, with several shifting factors influencing investor sentiment and market direction,” he says. “In this environment, staying invested, maintaining diversification, and being prepared to take advantage of periods of volatility will be key to capturing opportunities.”
