Navigating the Economy, Geopolitics and Asset Classes in the Months Ahead

by Larry Adam of Raymond James, 4/13/26

Key Takeaways

  • Despite the Iran conflict, US economic fundamentals remain on solid footing
  • High-quality bonds remain part of balanced lineup
  • Strong earnings and normalized valuations are supportive of the equity market

Over the past year, markets have been shaped by rapid advances in AI, elevated geopolitical tensions – especially involving Iran – and persistent uncertainty around global trade. In environments like this, successful investing rarely comes from chasing headlines or reacting emotionally. It’s about discipline, staying anchored to fundamentals and executing a clear long‑term game plan.

We frame our economic and market views on preparation, flexibility, and execution over short‑term noise. Here’s our playbook and targets for navigating the economy, geopolitics and asset classes in the months ahead.

US economy remains insulated from energy spike

The recent surge in energy prices has raised concerns about the growth outlook, especially given that major oil spikes have often preceded recessions. That said, the US entered the Iran conflict from a position of strength. As a net oil exporter, with productivity gains helping contain inflation pressures and overall momentum still solid, our view is that the economy remains on firm footing. Real‑time activity indicators continue to signal underlying resilience, reinforcing our expectation that growth accelerates to 2.4% in 2026. The consumer remains an area to watch, as higher gasoline prices may weigh on sentiment, but tax cuts should help offset near‑term pressure. And if a durable ceasefire holds, energy prices should move lower, limiting the potential impact to discretionary spending.

The Fed faces a tactical dilemma

The Fed is navigating a particularly challenging environment, with inflation still running above its 2% target and a labor market increasingly making the case for eventual support. Adding to the complexity, higher oil prices are pushing inflation up in the near term while simultaneously increasing downside risks to growth. At the same time, Kevin Warsh is just a confirmation away from becoming the next chair. While Warsh’s experience makes him a credible choice, his long‑standing criticism of the Fed and appetite for reform suggest potential internal resistance, especially with Powell expected to remain on the Board of Governors after his term ends. History shows markets often test new Fed leadership, but with the inflation bump likely temporary, we continue to see room for one additional rate cut by year‑end.

Bonds remain a reliable anchor

High‑quality bonds often step up when portfolios need them most, providing steady income in calmer markets and cushioning volatility when risks rise. Despite the recent backup in yields, our base case remains that the 10‑year Treasury yield ends 2026 in the 4.25% to 4.50% range, supported by solid growth, a steady labor market and well‑anchored inflation expectations.

We expect yields to remain range‑bound, with a move below 4% unlikely without a recession and a break above 5% requiring either a growth shock or renewed inflation pressure. We continue to favor higher‑quality bonds – Treasuries, investment‑grade corporates, and municipals – over riskier sectors, especially with yields still above historical averages.