Lombard Odier: Strong Corporate Profits Support Markets Amid Rate Outlook
Swiss bank Lombard Odier reports strong global corporate profits and expects the Fed to limit rate hikes to one or two amid steady 2026 economic momentum.
Swiss bank Lombard Odier published an economic analysis stating that corporate profits remain strong and the Federal Reserve is expected to limit rate hikes to one or two.
Despite geopolitical tensions, energy supply concerns, and stubborn inflation, the global economy maintained momentum in the first half of 2026. AI investments continued and corporate profits showed strength, though market gains were primarily concentrated in technology and infrastructure.
In the U.S., 208 IPOs valued at more than $137 billion took place in the first half of the year. If this pace continues, the number of IPOs this year will be the highest since 2021, though still far from the 1,078 IPOs recorded then. While a high volume of IPOs can indicate excessive optimism, their scale relative to total market value is much lower than in 2021.
Although numerous IPOs add shares to the market, Lombard Odier believes this will not harm the overall market as long as corporate profits remain robust and investors keep buying. Concerns would grow only if interest rates rose sharply alongside falling equity demand. The bank estimates the Fed will enact just one or two rate hikes, provided inflation continues to decline as expected.
U.S. tech firms are beginning to show returns on massive AI investments, and companies outside the Big Tech group are also posting profit growth. Opportunities are identified in healthcare, utilities, financials, and raw materials, favoring firms with growing earnings, steady demand, and pricing power.
In the bond market, a neutral stance is maintained on long-term government bonds and corporate debt, while emerging market bonds offer standout income potential. Geopolitical risks and rate uncertainty could trigger volatility, but the strategy remains invested while carefully selecting risks.
