2025 was a year marked by uncertainty, yet risk assets delivered strong returns,1 culminating in what could be described as an “almost everything” bull market. As we look ahead to 2026, we believe the conditions are in place for the market advance to continue.
Our outlook, Resilience and rebalancing, reflects two key themes:
Resilience
The private sector has demonstrated a remarkable ability to absorb economic shocks, in our view, supported by healthy corporate and household balance sheets with limited leverage and excess according to our analysis. We expect this resilience to be further bolstered by policy easing in the United States and fiscal support across Europe, Japan, and China. These stimulus measures should help lift the global economy out of what we view as a mid-cycle slowdown.
Rebalancing
While US equity markets, particularly the tech sector driven by the AI trade, are at elevated valuations, we see compelling opportunities elsewhere. Valuations are more attractive in non-US markets, smaller-capitalization stocks, and cyclical sectors within the US. A pickup in global activity could unlock value across these areas, contributing to a more balanced market leadership.
We enter 2026 with optimism, confident in the private sector’s durability, inclined to not fight global policymakers, and mindful of the need for diversification as the market narrative evolves.
Investment themes
- Potentially better growth, broader participation
A reacceleration from a mid-cycle slowdown lays the groundwork for greater market participation and cyclically-oriented sectors. - A weaker US dollar
Central bank policies diverge, weakening the dollar and supporting the groundwork for emerging market assets. - Reducing AI concentration risks
Key players in the AI theme have become expensive, but a clear catalyst for consolidation remains unclear. We prefer rebalancing to manage concentration risk. - Emerging market strength
Better global growth, few EM inflation pressures, and a weaker USD should bode well for emerging market asset performance in 2026. - Private credit offers diversification
A more benign risk environment, better growth, stable inflation, and easier US monetary policy are conditions where we expect private credit to perform well.
