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Get the complete 2026 midyear investment outlook, including deep dives on our investment themes, global highlights, macro views, and potential risks.
Investment Outlook 2026 midyear outlook: World disrupted? Resilience endured
Key takeaways
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Economic data and corporate results suggest the global economy remained resilient despite a host of events that could potentially disrupt global economies.
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The AI investment boom led to strong earnings growth,1 led by the technology sector. Data center demand for chips and power is expected to support semiconductors and hardware companies.
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We expect the global economy to re-accelerate later in the year, but that’s dependent on the timing of any resumption in energy flows through the Strait of Hormuz.
While our 2026 annual outlook argued that firmer global growth would favor non-US stocks and weigh on the US dollar this year, recent events have delayed — but not curtailed — this story. In a world undergoing immense disruption, we believe resilience has endured, which should provide a favorable investment environment. Our midyear outlook reflects two key themes:
- A world disrupted. In the first half of the year, the global economy contended with various disruptive forces, including the rise of artificial intelligence (AI), geopolitical fractures, the closure of the Strait of Hormuz, and an upset to energy and commodity supplies.
- Resilience endured. Private-sector leverage has fallen since the 2008 Global Financial Crisis, in our analysis. Meanwhile, previous rate cuts in the US and UK, along with looser fiscal policy in Europe and Japan, are supportive of a measured re-leveraging through stronger investment and spending, in our view. The growth-inflation backdrop is less supportive than we expected at the start of the year, but not weak enough to prevent global equities from potentially delivering positive returns in 2026, in our view.
For a quick take on the key themes shaping markets now — from global resilience and AI-driven growth to the US dollar and emerging markets — and where we see investment opportunities, watch our midyear outlook video below.
Transcript
Resilience and rebalancing. That was our theme at the start of the year. Resilience meant that we believe the global economy and the financial markets had enough strength to push forward, regardless of what might be thrown at them. Rebalancing meant we expected market participation would broaden beyond simply US growth stocks. Now, as we approach the midpoint of the year, we are affirming those views.
The global economy has remained resilient even in the face of geopolitical conflict. And while the year began with a broad market advance, leadership narrowed as uncertainty picked up. But we continue to believe in rebalancing. Geopolitical risks appear to have peaked prices, interest rates, inflation expectations also look to have reached their highs. This creates a more supportive macro backdrop.
It is one that could even allow the Federal Reserve at some point to reengage its rate cutting cycle,
which may benefit non-U.S. dollar assets, as well as smaller capitalization and cyclical stocks globally.
The global economy is held up and we continue to see a path towards later in 2026. To learn more about what we expect in the second half and the risks that could alter that outlook, explore our 2026 mid-year investment outlook.
Important information
All investing involves risk, including the risk of loss.
Past performance does not guarantee future results.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
The global economy has remained resilient: Based on the Bloomberg Economics Global GDP Tracker as of April 30, 2026. The tracker is based mainly on business surveys and deploys a machine learning algorithm to extract the key signals from data for 18 advanced and emerging market countries.
Leadership narrowed: Based on a comparison of the returns between the S&P 500 Index and S&P 500 Equal Weight Index as of May 28, 2026. The S&P 500 Equal Weight Index is the equally weighted version of the S&P 500 Index.
Geopolitical risk: Based on the Caldara Iacoviello Geopolitical Risk Uncertainty Index as of May 28, 2026. The index is compiled by Fed economists Dario Caldara and Matteo Iacoviello. It measures the occurrence of impactful geopolitical events/threats/conflicts since 1985 by counting the keywords used in the press.
Oil prices: Based on the price per barrel of US West Texas Intermediate Crude Oil as of May 28, 2026.
Interest rates: Based on the 10-year US Treasury rate as of May 28, 2026.
Inflation expectations: Based on the 3- and 5-year US Treasury inflation breakeven. A breakeven inflation rate is a market-derived estimate of future inflation, calculated by comparing the yield on a standard government bond (nominal) to the yield on a Treasury Inflation-Protected Security (TIPS) of the same maturity.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic and political conditions.
Growth stocks tend to be more sensitive to changes in their earnings and can be more volatile.
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.
Stocks of small- and mid-sized companies tend to be more vulnerable to adverse developments, may be more volatile, and may be illiquid or restricted as to resale.
A cyclical stock is an equity security whose price is affected by ups and downs in the overall economy.
The opinions referenced above are those of the speaker as of May 28,2026. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations.
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Investment themes to watch
The global economy has been evolving, and with it, the investment landscape. The themes we believe will matter most for investors in the back half of 2026 focus on market resilience, the US dollar, emerging markets, AI, and alternatives for income and diversification.
Market resilience
Most major assets have delivered positive returns so far in 2026 after a tumultuous March.2 We take this as a reminder of the value of staying invested in the face of troubling news flows.
Investment opportunities: We believe market performance for the remainder of the year is highly dependent on events in the Middle East. Resumption of traffic through the Strait of Hormuz will likely be met by a strong cyclical bounce, in our view, led by emerging market (EM) and European markets. We believe US stock and bond markets will likely perform well, too, but lag in cyclical areas such as materials and industrials.
US dollar is likely to continue its bout of weakness
A core tenet of our 2026 annual investment outlook was that the US dollar would weaken this year. We maintain that view. In our analysis, the dollar remains one of the more overvalued currencies on most measures. The fact that it hasn’t strengthened much in the face of the recent energy shock is telling.
Investment opportunities: If we’re correct and the US dollar weakens this year, we expect equities in non-US markets, especially EM, to perform well.
Emerging markets look well-positioned
A weaker US dollar and improving growth dynamics support our preference for emerging markets (EM). Select EM countries such as Taiwan and Korea have benefited from AI hardware scarcity, in our analysis. EM assets should benefit from global reacceleration — some from rising commodity prices, others from exposure to the AI theme. In our view, EM assets may have relatively attractive valuations.
AI is still a major market force
The AI story remains a dominant theme for both markets and many economies around the world. We don’t see that changing soon. The impact and best way to get exposure to the theme, however, appears in our view to be changing. We prefer exposure to semiconductors and hardware players and are wary of software companies.
Investment opportunities: We continue to see opportunities emerging from the AI theme and expect it to help power EM returns and continued earnings growth in exposed sectors, such as semiconductors, data center infrastructure, energy, and commodities.
Looking to alternative sources of income and diversification
Though we think the rise in inflation will be limited and short-lived, we believe that inflation won’t return to below target levels in most developed markets soon. We like to hold assets such as real estate and private credit, which can offer both income potential and diversification benefits in a more inflationary world.
Investment opportunities: We believe that real estate and private credit, such as direct lending, bank loans, and AAA-rated collateralized loan obligations (CLOs), can make sense.ate credit.
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Important information
NA5530443
Image generated using Firefly.
All investing involves risk, including the risk of loss.
Past performance does not guarantee future results.
Investments cannot be made directly in an index.
An investment in emerging market countries carries greater risks compared to more developed economies.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
AI technology companies are sensitive to specific risks such as small markets, business cycle changes, economic growth, technological progress, obsolescence, and regulation. These companies may have limited products, markets, resources, or personnel, making their securities more volatile, especially for smaller start-ups. Rapid technological changes can adversely affect their results. AI companies often rely on patents, copyrights, trademarks, and trade secrets to protect their technology, but there is no guarantee these protections will be sufficient. Significant research and development (R&D) spending does not ensure product or service success.
The Bloomberg Commodity Index is a broadly diversified commodity price index.
Bloomberg Emerging Markets (EM) Local Currency Government Index is a flagship benchmark that measures the performance of fixed-rate, local currency sovereign debt issued by emerging market countries. It serves as a standard performance reference for investors tracking sovereign bonds denominated in the issuer's domestic currency rather than U.S. dollars.
The Bloomberg Global Aggregate Treasuries Index is an unmanaged and unhedged index considered representative of the global treasury bond market.
The Bloomberg High Yield Corporate Bond Index measures the US dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. Bonds from issuers in an emerging market country of risk, based on the index's EM country definition, are excluded.
Commodities may subject an investor to greater volatility than traditional securities such as stocks and bonds, and can fluctuate significantly based on weather, political, tax, and other regulatory and market developments.
A collateralized loan obligation (CLO) is a single security backed by a pool of corporate debt.
A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments, or other debts. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice. NR indicates the debtor was not rated and should not be interpreted as indicating low quality. For more information on rating methodologies, please visit the following NRSRO websites: www.standardandpoors.com and select ‘Understanding Credit Ratings’ under Rating Resources ‘About Ratings’ on the homepage; https://ratings.moodys.io/ratings and select ‘Understanding Ratings’ on the homepage; www.fitchratings.com and select ‘Ratings Definitions Criteria’ under ‘Resources’ on the homepage. Then select ‘Rating Definitions’ under ‘Resources’ on the ‘Contents’ menu.
Diversification does not guarantee a profit or eliminate the risk of loss.
Earnings per share (EPS) refers to a company’s total earnings divided by the number of outstanding shares.
The EURO STOXX 50® Index measures the performance of blue-chip eurozone equities.
Fixed income investments are subject to the 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.
The FTSE 100 Index includes the 100 largest companies in terms of capitalization listed on the London Stock Exchange.
The FTSE EPRA/NAREIT Developed Index is an unmanaged index considered representative of global real estate companies and REITs.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic, and political conditions. Inflation is the rate at which the general price level for goods and services is increasing.
Investments focused in a particular sector, such as information technology, are subject to greater risk and are more greatly impacted by market volatility than more diversified investments.
Investments in real estate-related instruments may be affected by economic, legal, or environmental factors that affect property values, rents, or occupancies of real estate. Real estate companies, including REITs or similar structures, tend to be small- and mid-cap companies, and their shares may be more volatile and less liquid.
The JP Morgan Emerging Market Currency Index (EMCI) Spot Index is designed to track the performance of emerging market (EM) currencies against the US dollar.
Leverage measures a company’s total debt relative to the company’s book value.
Monetary easing refers to the lowering of interest rates and deposit ratios by central banks.
The Morgan Stanley Capital International (MSCI) All Country World (ACWI) Index is an unmanaged index considered representative of large- and mid-cap stocks across developed and emerging markets.
The Morgan Stanley Capital International (MSCI) Emerging Markets Index captures large- and mid-cap representation in emerging market (EM) countries. The local currency variant measures performance with the effects of currency changes removed.
The Nikkei 225 Index is a price-weighted average of 225 top-rated Japanese companies listed in the first section of the Tokyo Stock Exchange.
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 S&P 500® Index is an unmanaged index considered representative of the US stock market.
Tightening monetary policy includes actions by a central bank to curb inflation.
The opinions referenced above are those of the author as of June 15, 2026. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties, and assumptions; there can be no assurance that actual results will not differ materially from expectations.
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