The market bubble question isn’t on the minds of many asset managers. After riding triple-digit gains in equities for three straight years, global managers aren’t rushing to cash out; instead they’re leaning further into risk assets.
“We still expect solid growth and a friendlier stance from monetary and fiscal policy, which supports a risk-on tilt in our multi-asset portfolios. We remain overweight stocks and credit,” explained Sylvia Sheng, global multi-asset strategist at JPMorgan Asset Management.
“We’re riding the big secular trends and remain bullish through the end of next year,” noted David Bianco, Americas chief investment officer at DWS. “Right now, we’re not playing the contrarian role.”
Kicking off the year with ample—perhaps even elevated—exposure to equities, especially in emerging markets, is the stance of Nannette Hechler-Fayd’herbe, EMEA chief investment officer at Lombard Odier. “We don’t anticipate a recession in 2026.”
These views came from Bloomberg News interviews with 39 investment managers across the US, Asia, and Europe, including players at BlackRock, Allianz Global Investors, Goldman Sachs Group, and Franklin Templeton.
More than three-quarters of these allocators are positioning portfolios for a risk-on environment into 2026. The core bet is that resilient global growth, ongoing advances in artificial intelligence, accommodative monetary policy, and fiscal stimulus will drive outsized returns across global equity markets.
If this optimism proves correct, it could yield a fourth consecutive year of strong returns for the MSCI All-Country World Index, extending a run that has boosted global market capitalization by about $42 trillion since the end of 2022—the largest wealth creation surge for equity investors in history.
The case for optimism isn’t without caveats. The near-unified bullish mood among respondents, along with their high degree of confidence, echoes views held by sell-side strategists worldwide. The risk is that the broad enthusiasm becomes self-fulfilling and amplifies vulnerabilities if conditions shift.
Yet the AI-powered rally has already reshaped value for many firms, adding trillions in market value just a few years after the public breakout of ChatGPT. Still, AI remains in a relatively early phase of development, which tempers the bubble question.
Buy-side managers largely reject the notion that tech equities are in a bubble. While pockets of froth exist in less profitable tech names, about 85% of managers say valuations among the Magnificent Seven and other AI-heavy giants aren’t overstretched. They point to solid fundamentals underpinning the rally, signaling the start of a new industrial cycle.
In this view, the United States is set to remain the engine of the move higher. “American exceptionalism isn’t dead,” said Jose Rasco, HSBC Americas CIO, noting that as AI spreads, the US will play a pivotal role. Still, several strategists advise looking beyond the US for meaningful upside opportunities.
Helen Jewell of BlackRock suggested the US hosts many high-return, high-growth firms, but current valuations already reflect much of that upside, nudging interest toward non-US opportunities for additional gains.
Global earnings momentum is lifting prospects outside the US as well. Andrew Heiskell of Wellington Management highlighted broad earnings momentum across market caps and regions, including Japan, Taiwan, and South Korea, with 2026 offering potential for Europe’s earnings growth to revive and for more emerging markets to contribute.
Goldman Sachs Asset Management points to India as a standout 2026 story, with Alexandra Wilson-Elizondo describing India’s transition from tactical exposure to strategic core in global portfolios. AllianceBernstein’s Nelson Yu also anticipates improvements outside the US—governance reforms in Japan, stronger capital discipline in Europe, and improving profitability in some emerging markets driving allocations.
There’s growing optimism for small caps as well. Smaller stocks, along with industrials and financials, could see earnings advancement as the Fed’s policy shifts ease debt burdens. Francisco Simón of Santander Asset Management expects US small caps to post more than 20% earnings growth in 2026 after a period of underperformance, a view echoed by a fresh high for the Russell 2000.
Health care stands out as a compelling contrarian pick in a bullish cycle, given generally attractive valuations and the potential upside as policy and demographics align favors. Morgan Stanley Investment Management’s Jim Caron notes that health care could surprise on the upside in the US, aided by policy shifts in a mid-term election year.
Nonetheless, almost every allocator voiced caveats. The top concern is a renewed inflation spike in the US. If the Fed is pressured to pause or reverse easing due to higher prices, turbulence could flare up for both stocks and bonds.
Amélie Derambure of Amundi SA warned that a US inflation rebound in 2026 would be a double jeopardy for multi-asset funds, making the environment tougher than a straightforward economic slowdown. The rule of thumb remains: the more the Fed is aligned with market dynamics, the better the setup for 2026.
Trade policy remains a wildcard. A flare-up in tensions under President Trump—especially tariffs driving inflation—could weigh on risk assets. Oil and gas stocks are under soft coverage now, though a geopolitical shock that disrupts supply could briefly lift certain energy stocks, the consensus suggests the net effect would likely be negative for risk assets.
European automakers are broadly viewed as a no-go for 2026, pressured by fierce competition from Chinese manufacturers, squeezed margins, and the EV transition’s structural challenges.
Despite the broad optimism, a few observers urge caution about the rally’s sustainability. Amundi’s Derambure warns that widespread risk-on positioning reduces tolerance for surprises, underscoring the need for risk management and scenario planning in portfolios.
If the market’s momentum continues, the coming years could deliver remarkable returns—but the path is not guaranteed, and diverging views remain an invitation for readers to weigh in with their own take on where the market goes next.
