In 2026, investors should rebalance portfolios to embrace greater diversification, thoughtfully navigate opportunities in artificial intelligence, and prioritize investments across the electricity transmission value chain. With heightened equity risks and a weakening US dollar, a disciplined, multi-asset approach will help strengthen portfolio resilience and capture emerging growth themes.
Yes, the period of greatest tariff uncertainty for global equity investors is likely behind us.
As the second piece in a three-part series, we examine how AI may support productivity growth and how capital is being deployed to realize its potential.
No, investors should hold equity allocations in line with their policy portfolio weights.
We expect global equities to outperform bonds, as near trend economic growth should support continued corporate earnings growth and healthy risk appetite. Stock/bond correlations should be lower than the 2023–24 peak levels, even as protectionist US policy may drive global economic uncertainty higher.
No, not right now. We continue to believe investors should: (1) keep equity allocations aligned with broad policy targets; (2) maintain modest overweights in less expensive areas within equities, such as developed markets value and small caps; and (3) maintain a modest overweight in long US Treasury securities within bond portfolios.
We expect global equity performance will be below its long-term median level, but we believe investors should hold equity allocations in line with policy targets. Within equities, we see opportunities in developed value, developed small caps, and China. We doubt European and emerging markets ex China equities will outperform, and we believe the share of active strategies that outperform will increase.
Asset performance is highly sensitive to the global business cycle. In this chart book, we highlight the significant shifts in performance distributions across the global business cycle for major asset classes, including equity regions, styles, sectors as well as for fixed income, real asset and currencies. Ultimately, understanding the distributions of asset performance across business cycle stages and considering where the global economy is headed are key inputs in a rigorous investment decision-making framework.
Yes, we expect US small-cap equities will outperform US large-cap equities this year. Our view is based on the belief that the large valuation spread that exists will likely narrow and that large company earnings are likely more at risk of missing expectations than small company earnings.
We expect global earnings growth will be below average next year, as prior interest rate hikes increasingly bite. With this backdrop, we expect value equities will outperform, Chinese equity underperformance will correct, and Healthcare may present an overweight opportunity.