A majority of large asset managers are most optimistic about equities for 2026, particularly those from emerging markets. US equities remain a strategic cornerstone, while Europe and Japan play a smaller but growing role in geographic diversification.
These findings come from a large, representative Investment Officer survey of nearly thirty major asset managers on their outlook for 2026. Sixty percent select equities as their preferred category for next year, half of whom specifically favor EM equities.
The most frequently cited argument is that equities from these markets are generally lower and more attractively priced. “Despite the strong rally since the trough in april, valuations are still relatively attractive compared with US equities,” said chief economist Paul Diggle of Aberdeen. Several asset managers also expect a weakening or stabilizing dollar to give emerging markets an additional tailwind.
In general, asset managers see the overall equity climate improving. Falling interest rates, declining inflation, and monetary or fiscal stimulus form the basis for a favorable year for equities, in their view. They point specifically to the suspension of the debt brake in Germany and structural reforms in Japan. Meanwhile, in the US the stimulus is “unprecedented” given the low unemployment rate, said strategist Lilia Peytavin of JP Morgan Asset Management. “Never before have we seen budget deficits or rate cuts of this magnitude outside recessions.”
According to the surveyed experts, the favorable environment will lead to strong and consistent earnings growth among companies, with US firms in particular seeing profit margins rise toward record levels. “We have yet to see any clear threats to corporate earnings,” said CIO Fabiana Fedeli at M&G Investments. Fedeli does note, however, that the full impact of US import tariffs is not yet visible.
One third of the asset managers who choose equities prefer US equities. Columbia Threadneedle is among that group. “Despite headwinds from import tariffs, US companies have adapted well to the new environment, positioning them for earnings growth in the high single digits to low double digits,” said CIO William Davies of Columbia.
There is one caveat: various experts point to high valuations in the equity markets. They see US equities as expensive, particularly megacaps and AI-related stocks. Nevertheless, most experts do not consider this a barrier to further price increases, though the upside potential is more limited than in earlier phases.
Artificial intelligence
Investments in artificial intelligence may support earnings growth, as they are expected to lead to higher productivity and rising margins. Technology companies may benefit from the AI boom, according to the experts, but so may financials, industrials, and utilities. Productivity gains in these sectors are not yet fully priced in by investors.
The AI theme is also an important driver for the Chinese equity market, said Diggle of Aberdeen, noting that there is more room for upward movement there than in the US. Salman Ahmed, head of macro policy and strategic asset allocation at Fidelity International, added: “The Chinese and US tech markets are becoming less correlated, as the two countries take different approaches to the further development of AI. As a result, we believe it is wise to hold a broad basket of tech stocks from both China and the US.”
Bonds
Not all surveyed asset managers prefer equities. Because of high valuations in the equity market, several parties see room for a more defensive approach, for example through bonds. They point to higher starting yields, particularly for high-quality fixed income.
Some parties, partly due to the rollout of AI solutions, see opportunities in infrastructure bonds. These generate stable, inflation-linked income, are backed by physical assets, and offer protection against downside risks. “Projects related to infrastructure and the energy transition could usher in the next phase of growth for Europa,” said chief strategist Roelof Salomons of Blackrock Nederland.
Inflation-linked bonds are also mentioned explicitly. Investors are pricing in lower future inflation than what has recently appeared in the data, which means these bonds can offer additional protection against higher-than-expected inflation.
In addition, bonds from emerging markets are frequently cited as favorites because of higher real interest rates, declining inflation, and tighter fiscal discipline in many countries. A weaker US dollar may also support emerging market bonds. Investors are looking at sovereign bonds from Brazil, Mexico, and South Africa, where policy rates remain high and yield curves steep.
European debt securities are also receiving positive attention due to the stable macro environment and low default rates. Yield curves are steep, while the European Central Bank’s monetary policy is supportive. For US investors, European government bonds offer attractive yields with currency risk protection.
“Government bonds worldwide can again play a meaningful diversification role,” said co-CIO Anwiti Bahuguna of Northern Trust Asset Management. According to her, investors no longer need to rely exclusively on US Treasuries.
According to Salomons of Blackrock, bond investors will need to keep a close eye on rising debt levels. “Most countries have already raised their debt to the maximum, meaning fiscal developments must be monitored carefully. The focus is on safe and stable investments,” Salomons said.
“The common thread across all asset classes is that investors must remain flexible in a world where inflation is cooling but structurally higher than before the coronavirus pandemic, and where financial conditions are easing without fully normalizing,” concluded Bahuguna of Northern Trust.
Investment Officer Outlook Survey 2026
This article is part of a series of five and is based on a survey that Investment Officer sent in November to asset managers operating in Europe. The findings are based on written responses from strategists and investors at Aberdeen, Aegon Asset Management, Amundi, Blackrock, Capital Group, Cardano, Carmignac, Columbia Threadneedle Investments, Comgest, DWS, Fidelity International, Goldman Sachs Asset Management, Invesco, JP Morgan Asset Management, Legal & General Investment Management, M&G Investments, MFS Investment Management, Natixis Investment Managers, Northern Trust Asset Management, Nuveen, PGIM Fixed Income, Pictet Asset Management, RBC Bluebay, Robeco, Schroders, Triodos Investment Management, Van Lanschot Kempen and Vanguard. Together these asset managers oversee an estimated 54,000 billion dollar globally, just over 40 percent of the market.