Global Fixed Income Strategy – Monthly Update
Global macro strategy
Executive summary
• AI-led growth: US growth is increasingly driven by AI and tech capex, but overall growth remains moderate (around 2–2.5%) with sticky inflation and a Fed on hold.
• Narrow economic strength: Outside of AI, the economy is softer—consumption has cooled, real income growth is weak, and housing remains a drag.
• AI capex supercycle: Big Tech investment is surging (spending by the Big 4 is expected to reach USD725 billion in 2026), with persistent capacity constraints implying continued strong spending into 2027.
• Limited macro spillover: Despite its scale, AI investment alone is not large enough to lift the USD31 trillion US economy to 3–4% growth without broader economic strength.
It’s becoming clear that US growth is increasingly being led by AI and other technology-related investment. This month, we try to put a number on it—and, just as important, check how the rest of the economy is doing.
Our baseline view remains: resilient US growth around potential (around 2%), sticky inflation around 3%, and a Federal Reserve (Fed) on hold. The key point is that the US economy is not experiencing broad-based growth; AI investment is powerful, but much of the rest of the economy has been softer. Consumption has moderated, real income growth is weak and housing remains a drag. That is why we expect growth in the 2–2.5% range this year rather than a strong pace of 3.5–4.0%.
The AI capex “supercycle” is accelerating
A supercycle is unlike a typical economic, sector or asset class cycle—it’s much longer and broad-based, and affects multiple markets, such as equities, commodities and interest rates. Drivers tend to be structural, such as demographic, technological or geopolitical, and create persistent imbalances—demand can outpace supply (or vice-versa) for years.
We believe we are in an AI infrastructure spending supercycle, and expect it to be a major boost to investment growth in the coming years. In 2026, we expect capital expenditure (capex) by the “Big 4” tech companies (Amazon, Meta, Microsoft and Google) to reach USD725 billion, an 80% increase compared to 2025.1 This means capital expenditure will likely be 45% to 57% of revenue, which is historically unprecedented.2
Source: Company earnings, Q1 2026. E=estimate.
Investment risks
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Fixed-income investments are subject to credit risk of the issuer and the effects of changing interest rates. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating.
Non-investment grade bonds, also called high yield bonds or junk bonds, pay higher yields but also carry more risk and a lower credit rating than an investment grade bond.
The risks of investing in securities of foreign issuers, including emerging market issuers, can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.
The performance of an investment concentrated in issuers of a certain region or country is expected to be closely tied to conditions within that region and to be more volatile than more geographically diversified investments.
