Navigating a market pulled between risk and growth: Insights from Jurrien Timmer - May 11, 2026

Geopolitics as a persistent backdrop

The ongoing standoff in the Strait of Hormuz continues to disrupt the flow of oil, keeping energy prices elevated. While the situation remains unresolved, markets have become less sensitive to daily headlines. With no clear escalation underway, investors appear less reactive to developments than earlier in the conflict. That does not diminish the importance of the issue. Oil flows through the Strait are critical to the global economy, and prolonged disruption raises the risk that energy shortages begin to influence inflation more broadly. Upcoming diplomatic discussions between the United States and China were also noted as a key variable, given reliance on oil shipments through the region and its role in global supply chains. For now, markets appear willing to wait, focusing on factors they can assess more clearly, particularly corporate earnings.

Oil supply stress and inflation risks

The oil market itself is showing signs of strain. Prices for near‑term delivery remain higher than prices further out, a pattern that typically reflects tight supply and low inventories. Current conditions were described as unusually stressed by historical standards. This matters because oil is not only an energy input. It is also essential for fertilizers, industrial gases and a wide range of production processes. If high prices persist, inflation pressures could become more entrenched, making it harder for central banks to lower interest rates. Inflation remaining above central bank targets it could limit the ability of policymakers to ease financial conditions. That constraint could influence bond markets and shape how investors assess risk across asset classes.

Earnings momentum anchored in AI investment

Despite these risks, markets continue to draw confidence from earnings. Corporate profit growth has been particularly strong among companies tied to artificial intelligence infrastructure, including semiconductors, memory and data centres. Unlike a typical earnings season, where expectations often drift lower, current estimates have been moving higher. This dynamic has been attributed to a wave of capital spending focused on AI, which is translating into revenue and profit growth sooner than many investors expected. While strong earnings do not eliminate risk, valuations are being supported by the pace of profit growth at present. For now, earnings appear to be doing much of the work in sustaining market confidence.

Market leadership and participation

Much of the recent market advance has been driven by a narrow group of large technology companies. Broader participation across sectors had improved earlier in the year but narrowed again as energy and inflation concerns resurfaced. A more durable expansion in market leadership could be supported by easing pressure from oil prices. If energy costs were to decline and inflation concerns softened, other parts of the market could begin to participate more fully alongside large technology stocks.

When stocks and bonds move together

One of the more notable shifts has been the changing relationship between major asset classes. Stocks and bonds have become more positively correlated, reducing the diversification benefit bonds have historically provided during periods of equity market stress. This shift has been linked to inflation risk. When inflation rises, both stocks and bonds can struggle at the same time. In contrast, commodities and certain alternative strategies have behaved differently, offering potential diversification when traditional portfolios face pressure.

Gold, Bitcoin, and alternative assets

Renewed interest has also emerged in assets often viewed as inflation hedges. Gold continues to attract attention as a reserve asset, particularly as global money supply expands. It has not fully reflected that growth, in part because higher bond yields have weighed on prices. Bitcoin has become more accessible through regulated investment vehicles. It was described as a volatile asset that tends to move sharply rather than gradually, but one that some investors use alongside gold as part of a broader approach to protecting purchasing power.

Portfolio considerations in an uncertain environment

Given the push and pull between growth and risk, diversification remains central. Portfolios that combine equities, fixed income and diversifying assets have, in this view, helped manage recent volatility. If energy risks recede, traditional portfolio structures could regain their footing. If they persist, maintaining exposure to assets that respond differently to inflation and geopolitical stress may help manage downside risk.

Conclusion: Watching what matters most