Investors often seek to lock in profits, but for global asset managers riding a three-year streak of double-digit equity returns, exiting now seems premature.
"We expect robust global growth alongside accommodative monetary and fiscal policies, supporting our risk-on stance in multi-asset portfolios. We remain overweight equities and credit," said Sylvia Sheng, Global Multi-Asset Strategist at J.P. Morgan Asset Management.
"We’re aligning with strong market momentum and maintain a bullish outlook through next year," added David Bianco, Chief Investment Officer for the Americas at DWS. "For now, we won’t fight the trend."
"At the start of the new year, ensure sufficient—even overweight—equity allocations, particularly in emerging markets," noted Nanette Hechler-Fayd’herbe, CIO for EMEA at Lombard Odier. "We foresee no recession in 2026."
These views emerged from Bloomberg’s survey of 39 institutions, including BlackRock, Allianz Global Investors, Goldman Sachs, and Franklin Templeton, spanning the U.S., Asia, and Europe.
Over 75% of allocators plan to maintain risk-on positioning throughout 2026, betting on resilient global growth, AI breakthroughs, and policy easing to drive equity outperformance.
Yet risks persist. Consensus is nearly unanimous among surveyed firms, aligning closely with sell-side strategists. If bullish forecasts hold, the MSCI ACWI would notch a fourth straight year of gains, extending a bull run that has added $42 trillion in global market cap since late 2022—a record for equity investors.
The optimism isn’t baseless. AI investments have fueled trillion-dollar valuations, with the sector still in its infancy despite ChatGPT’s three-year public presence.
**Tech Sector: No Bubble Here** Most fund managers dismiss "tech bubble" concerns. While some acknowledge froth in unprofitable tech names, 85% argue valuations for the "Magnificent Seven" and other AI leaders remain justified by fundamentals, signaling a new cycle.
"When tech firms deliver earnings far beyond expectations, it’s not a bubble. Their profits now outpace the rest of the U.S. market," said Avinash Bahuguna, Global Co-CIO at Northern Trust Asset Management.
This outlook keeps the U.S. central to the rally.
"‘American exceptionalism’ isn’t outdated," remarked Jose Rasco, CIO for the Americas at HSBC. "As AI proliferates globally, the U.S. will lead."
Still, many agree with BlackRock’s Helen Jewell, who advises looking abroad for upside: "The U.S. hosts high-growth firms, but these are priced in. Other markets offer more attractive opportunities."
**Global Opportunities Emerge** Corporate earnings take center stage. Fiscal expansions from Europe to Asia bolster profit expectations.
"Earnings growth is broadening—by market cap and region, with Japan, Taiwan, and Korea excelling," said Andrew Haskel, Equity Strategist at Wellington Management. "Europe and more EMs should recover in 2026."
Goldman Sachs’ Alexandra Wilson-Elizondo highlighted India as a top 2026 pick: "It could mirror Korea’s valuation re-rating, shifting from tactical to strategic allocations."
Bernstein’s Nelson Yu noted improving ex-U.S. fundamentals, citing Japan’s governance reforms, European capital discipline, and EM profit rebounds.
**Small Caps Gain Favor** Investors target AI beneficiaries, especially clean energy providers meeting power demand. Small caps also shine.
"Small caps, industrials, and financials have brightening earnings prospects," said Stephen Dover of Franklin Templeton Institute. "Higher leverage in these sectors benefits from Fed rate cuts."
BBVA’s Francisco Simon predicts U.S. small-cap profits could surge over 20% in 2026, with the Russell 2000 recently hitting record highs.
Healthcare also appeals as a contrarian play, combining low valuations and strong fundamentals.
"U.S. healthcare may surprise positively," said Morgan Stanley’s Jim Caron. "Midterm election policies could aid the sector, which remains undervalued."
**Risks Loom** Nearly all allocators flagged inflation as the top threat. A Fed pause or reversal on rate cuts could roil markets.
"Our base case excludes this, but resurgent U.S. inflation would hit multi-asset funds doubly—pressuring both stocks and bonds," warned Amélie Deronzier of Amundi.
Trade risks also weigh, particularly potential U.S. tariff hikes under a Trump administration, which could reignite inflation and hurt risk assets.
Energy producers remain out of favor unless geopolitics disrupt supply chains—though such events might still harm broader risk assets.
"Oil-price shocks from the Middle East or Ukraine would hit markets hardest," said Wells Fargo’s Scott Wren.
Europe’s auto sector faces headwinds from Chinese competition, margin pressures, and EV transitions, making it a "no-go zone" for 2026, per Allianz’s Isabelle de Gavoty.
Despite these risks, most see the rally enduring—though extreme bullishness itself warrants caution.
"The market’s full risk-on mode worries me," Deronzier admitted. "High concentration leaves it vulnerable to sudden shocks."