From the Desk

Every quarter, the International Monetary Fund (IMF) cranks out its World Economic Outlook. It’s a comprehensive update. Its economists run the numbers on most developed and emerging economies. As the IMF forecasts GDP and inflation, it also look for cracks that could cause setbacks.

In its most recent report, the IMF lays out a few energy scenarios. In addition to its base case or “reference forecast,” it adds two scenarios.  One is an “adverse” case where oil supply reopening is delayed, which drives prices to average $100 a barrel for the rest of this year. The other is a “severe” case, that anticipates more infrastructure damage, resulting in prices above $110 a barrel well into next year. In this severe case, 2026 GDP drops from 3.1% to 2%, while inflation increases from 4.4% to nearly 6%.

The energy effects vary by region and degree of dependency on Middle East supply. Asian countries would take the biggest hit, followed by Europe. Canada and the U.S. would be relatively less impacted, being more energy independent. Nevertheless, consumers everywhere will feel the drag. The IMF thinks this energy shock could morph into one of the most disruptive ever. It urges central banks to be vigilant as extended supply shocks can destabilize inflation expectations.    

While markets are not expecting a dire outcome, they have at least revised their outlook on monetary policy. Before the crisis, most major central banks were expected to cut rates. Now they have flipped to expecting rate hikes, or a pause in the case of the U.S. Federal Reserve, to combat higher inflation. For now, markets are expecting stress, but not extended disruptions, that could carry over into next year.

Sources: International Monetary Fund, Bloomberg, The Financial Times, 2026.

Equities are back to historical highs, high yield and investment grade spreads are headed back to historical tights, oil prices are elevated (but off their highs) and public business development companies have rallied. Is all well? Or has complacency regained control of risk markets? Working through market concerns from the past several weeks, we’ve observed that:

• The market realizes the U.S. Federal Reserve will likely leave rates unchanged – potentially a positive
• The war for now has been discounted; the market might be complacent
• Private credit continues to make headlines; when it comes to the disconnect between public and private vehicles, we think there’s room for further progress
• Earnings growth for the S&P 500 Index is expected to be around 13% this quarter – a positive
• Hyperscaler capex may be limited by power consumption needs, and it’s too soon to say how software companies will continue to fare in the current landscape

That leaves us with the impression that, for now, risk markets seem appropriately priced. The caveat is that troubles in the Middle East could again escalate substantially and any further bad news in private credit or technology earnings could stall the rally or reverse its direction. Wider credit spreads could generate some investment ideas, but we remain highly selective in our investments.

Beware the Ides of April.

Source: Bloomberg, 2026.