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27 Apr 2026

This week’s meetings of the Federal Reserve (Fed), European Central Bank (ECB) and Bank of England (BoE) are likely to pass without any policy moves. But with the outlook still uncertain, investors will be listening carefully for clues on how policymakers are weighing up inflation and growth risks, although the central banks are likely to try and keep their options open.

Market expectations for rates this year look more balanced than they did a few weeks ago. At the height of US–Iran tensions and the oil price spike, markets were pricing in three to four rate rises in 2026 from both the ECB and BoE, including moves as early as April. That reflected initially hawkish messaging as policymakers sought to reinforce their inflation-fighting credibility in the face of another supply-driven shock. As Fed Governor Christopher Waller noted recently, while it may be logical to “look through” individual shocks, a run of shocks requires greater vigilance.

Since then, a partial retreat in oil prices, increased attention to European growth risks, and softer rhetoric from both the ECB and BoE suggest any tightening is likely to be limited.

In the US, markets were not so quick to price in hikes, reflecting the Fed’s dual mandate and the potential arrival of a more dovish Chair, Kevin Warsh, who was put through his paces by the Senate banking committee at his confirmation hearing last week. Even so, investors have largely priced out Fed cuts this year.

Markets feel chaotic in 2026, but equity volatility is actually… normal. Global stock market volatility typically sits in the mid-teens, which is where it is today. So, what’s the story?

First, is that geopolitical tensions create spikes in volatility, but they tend to fade fast. In 2026, stocks recovered from the geopolitics-driven drawdown a few days quicker than the historic average.

Second, volatility isn’t the best measure of risk, but it shapes behaviour.  When investors throw in the towel at the lows, volatility is often the culprit. It encourages bad habits.

Third, the macro regime matters. Today’s world of supply shocks, elevated macro uncertainty, and concentrated indices, means episodic bursts of volatility are likely a recurring feature of investment markets.

In summary, volatility is the price of admission in 2026. Staying disciplined, diversified, and avoiding the behavioural traps remain the investor’s edge.

The insatiable global appetite for memory chips helps explain the gap in profit growth between North and Southeast Asia. While capex spending continues, it offers resilience to the overall EM profit picture. But as traffic through the Strait of Hormuz opens up, EM profits growth should broaden out beyond tech – and be less K shaped.

Despite resilient services activity, improving corporate and banking balance sheets, and reforms to support consumption and capex, profits could face near-term pressure from high energy prices. Nevertheless, the MSCI India now trades at around 20x forward P/E – around its 10-year average – and the premium to Asia has compressed.

So, while foreign inflows into EMs are sensitive to global sentiment, some of these markets are proving to be increasingly resilient – which, in turn, should continue to boost their appeal to global investors.

Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. You cannot invest directly in an index. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Costs may vary with fluctuations in the exchange rate. Source: HSBC Asset Management. Macrobond, Bloomberg, Refinitiv, Factset. Data as at 7.30am UK time 24 April 2026.

For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector or security. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. You cannot invest directly in an index.  Source: HSBC Asset Management. Data as at 7.30am UK time 24 April 2026.

Global equities posted modest declines as oil prices rebounded amid ongoing geopolitical concerns. In developed markets, the S&P 500 pulled back from a new high despite solid Q1 US earnings and continued AI optimism, while tech shares led the gains in Nikkei 225, which also hit a fresh record. In Europe, the Euro Stoxx 50 fell, and the FTSE 100 also ended lower. Other Asian markets were mixed: strong semiconductor earnings lifted Kospi to record highs, while Shanghai Composite edged higher. Conversely, Hang Seng and Sensex declined. In rates, US Treasury yields rose ahead of this week’s Fed policy meeting, alongside higher sovereign yields across Europe. In FX, the US dollar notched modest gains against major peers.