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2026 Investment Outlook: Such Great Heights
AI’s ascendance has broad global implications, from driving equities to new peaks to shifting dynamics in fixed income markets. Investors are assessing where to go from here – and diversification will be the watchword for 2026.
We see four broad themes that will shape the course of investing in 2026:
A K-shaped economic trajectory will drive markets and investing this year.
The K-shaped bifurcation among lower- and higher-end consumers and large and small businesses is most pronounced in the US, while the dynamic is less marked in Europe, hitting mostly at the industry level (particularly energy-intensive sectors), with stronger social safety nets better insulating households from its effects. While these dynamics could create vulnerabilities to shocks and related volatility, we think fears of a meltdown are overblown – and that related volatility could create opportunities to buy on related dips.
2026 may usher in a ‘micro’-driven version of US exceptionalism – and a pivot back.
After a year in which sentiment was moving away from US investment for macro and policy reasons, 2026 may witness an updated version of the US exceptionalism existing before 2025 – a period driven by a big dose of post-Covid US fiscal activism that spurred consumption and investment at a time when other countries were fiscally on the fence. Now, we expect investors to seek out early beneficiaries of AI that will emerge predominantly in the US, pulling investors around the world into investment opportunities for which they will first need to purchase US dollars.
Fears of ‘bugs’ in the credit system are likely overblown.
Despite concerns that recent isolated US bankruptcies may be only the most visible “cockroaches” in the banking and credit markets or indicate a more systemic problem in the foundation of the system, we view any blowup in the credit cycle as highly unlikely barring a major economic downturn – which we likewise don’t expect. We think fixed income investors should “stay calm and keep their carry on” amid disruptive headlines this year.
Agility and innovation will drive equity alpha beyond tech in 2026.
Though AI and Big Tech are now clearly dominating equities, we see a broadening opportunity set with alpha potential across markets for active investors. As earnings growth extends beyond the biggest names, we expect market participation to expand in parallel – and identifying companies in any sector that are using AI effectively to boost productivity and gain enduring competitive advantages will be key. The heated debates and persistent uncertainties characterizing equity markets are a boon to active investing, providing opportunities for bottom-up investors to take advantage of the resulting mispricings to generate alpha.
Explore our key asset class convictions
After reaching Mag 7-driven highs in 2025, we see equity opportunities extending well beyond tech in 2026 – and the key to alpha potential will be finding companies in any sector that effectively harness AI to pull ahead.
Amid alarming headlines, we believe fixed income investors should stay calm and stay invested in 2026 – favoring a stable but cautious approach that focuses on maintaining diversified yield and carry in portfolios rather than seeking outsized excess returns.
We expect a new, “micro-driven” version of US exceptionalism to emerge in 2026, this time arising from private sector investment and US leadership in AI – not macro effects. Our 2026 outlook outlines how AI’s rapid evolution is driving allocations to equities, fixed income, and alternatives.
