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There\u2019s a time when investments run their course and the prudent move is to cash out. For global asset managers who\u2019ve ridden double-digit gains in equities for three straight years, that time is not now.<\/p>\n
\u201cOur expectation of solid growth and easier monetary and fiscal policies supports a risk-on tilt in our multi-asset portfolios. We remain overweight stocks and credit,\u201d said Sylvia Sheng, global multi-asset strategist at JPMorgan Asset Management.<\/p>\n
\u201cWe are playing the powerful trends in place and are bullish through the end of next year,\u201d said David Bianco, Americas chief investment officer at DWS. \u201cFor now we are not contrarians.\u201d<\/p>\n
\u201cStart the year with sufficient exposure, even over-exposure to equities, predominantly in emerging market equities,\u201d said Nannette Hechler-Fayd\u2019herbe, EMEA chief investment officer at Lombard Odier. \u201cWe don\u2019t expect a recession in 2026 to unfold.\u201d<\/p>\n
Those assessments came from Bloomberg News interviews with 39 investment managers across the US, Asia and Europe, including at BlackRock Inc., Allianz Global Investors, Goldman Sachs Group Inc. and Franklin Templeton.<\/p>\n
More than three-quarters of the allocators were positioning portfolios for a risk-on environment through 2026. The thrust of the bet is that resilient global growth, further developments in artificial intelligence, accommodative monetary policy and fiscal stimulus will deliver outsize returns in all fashion of global equity markets.\u00a0<\/p>\n
The call is not without risks, including simply its pervasiveness among the respondents, along with their overall high degree of assuredness. The view among the institutional investors also aligns with that of sell-side strategists around the globe.\u00a0<\/p>\n
Should the bullishness play out as expected, it would deliver a stunning fourth straight year of bumper returns for the MSCI All-Country World Index. That would extend a run that\u2019s added $42 trillion in market capitalization since the end of 2022 \u2014 the most value created for equity investors in history.\u00a0<\/p>\n
That\u2019s not to say the optimism is without merit. The artificial intelligence trade has added trillions in market value to dozens of firms plying the industry, but just three years after ChatGPT broke into the public consciousness, AI remains in the early phase of development.<\/p>\n
The buy-side managers largely rejected the idea that the technology has blown a bubble in equity markets. While many acknowledged some pockets of froth in unprofitable tech names, 85% of managers said valuations among the Magnificent Seven and other AI heavyweights are not overly inflated. Fundamentals back the trade, they said, which marks the beginning of a new industrial cycle.\u00a0<\/p>\n
\u201cYou can\u2019t call it a bubble when you\u2019re seeing tech companies deliver a massive earnings beat. In fact, earnings from the sector have outstripped all other US stocks,\u201d said Anwiti Bahuguna, global co-chief investment officer at Northern Trust Asset Management.<\/p>\n
As such, investors expect the US to remain the engine of the rally.\u00a0<\/p>\n
\u201cAmerican exceptionalism is far from dead,\u201d said Jose Rasco, chief investment officer at HSBC Americas. \u201cAs artificial intelligence continues to spread around the globe, the US will be a key participant.\u201d\u00a0<\/p>\n
Most investors echoed the sentiment expressed by Helen Jewell, international chief investment officer of fundamental equities at BlackRock, who suggested also searching outside the US for meaningful upside.<\/p>\n
\u201cThe US is where the high-return high-growth companies are, so we have to be realistic about that. But those are already reflected in valuations, and there are probably more interesting opportunities outside the US,\u201d she said.<\/p>\n
Profits matter above all else for equity investors, and huge bumps in government spending from Europe to Asia have stoked estimates for strong gains in earnings.<\/p>\n
\u201cWe have begun to see a meaningful broadening of earnings momentum, both across market capitalizations and across regions, including Japan, Taiwan, and South Korea,\u201d said Wellington Management equity strategist Andrew Heiskell. \u201cLooking into 2026, we see clear potential for a revival of earnings growth in Europe and a wider range of emerging markets.\u201d<\/p>\n
India is one of the most compelling opportunities for 2026, according to Goldman Sachs Asset Management\u2019s Alexandra Wilson-Elizondo, global co-head and co-chief investment officer of multi-asset solutions.<\/p>\n
\u201cWe see real potential for India to become the Korea-like re-rating story of 2026, a market that transitions from tactical allocation to strategic core exposure in global portfolios,\u201d she said.\u00a0<\/p>\n
Nelson Yu, head of equities at AllianceBernstein, said he sees improvements outside of the US that will mandate allocations. He noted governance reform in Japan, capital discipline in Europe and recovering profitability in some emerging markets.<\/p>\n
At the sector level, the investors are looking for AI proxies, notably among clean energy providers that can help meet the technology\u2019s ravenous demand for power. Smaller stocks are also finding favor.<\/p>\n
\u201cThe earnings outlook has brightened for small-capitalization stocks, industrials and financials,\u201d said Stephen Dover, chief market strategist and head of Franklin Templeton Institute. \u201cSmall-cap stocks and industrials, which are typically more highly leveraged than the rest of the market, will see profitability rise as the Federal Reserve trims interest rates and debt servicing costs fall.\u201d<\/p>\n
Over at Santander Asset Management, Francisco Sim\u00f3n sees earnings growth of more than 20% for US small caps after years of underperformance. Reflecting the optimism, the Russell 2000 Index of such equities recently hit a record high.<\/p>\n
Meanwhile, the combination of low valuations and strong fundamentals makes health care one of the most compelling contrarian opportunities in a bullish cycle, a preponderance of managers said. \u00a0<\/p>\n
\u201cHealth-care related sectors can surprise to the upside in the US markets,\u201d said Jim Caron, chief investment officer of cross-asset solutions at Morgan Stanley Investment Management. \u201cThis is a mid-term election year and policy may at the margin support many companies. Valuations are still attractive and have a lot of catch up to do.\u201d<\/p>\n
Virtually every allocator struck at least a note of caution about what lies ahead. The top worry among them was a rekindling of inflation in the US. If the Fed is forced by rising prices to abruptly pause or even end its easing cycle, the potential for turbulence is high.<\/p>\n
\u201cA scenario \u2014 which is not our base case \u2014 whereby US inflation rebounds in 2026 would constitute a double whammy for multi-asset funds as it would penalize both stocks and bonds. In this sense it would be much worse than an economic slowdown,\u201d said Am\u00e9lie Derambure, senior multi-asset portfolio manager at Amundi SA.\u00a0<\/p>\n
\u201cThe way investors are headed for 2026, they need to have the Fed on their side,\u201d she added.<\/p>\n
Another worry is around President Donald Trump\u2019s capriciousness, particularly when it comes to trade. Any flareup in his trade spats that fuels inflation through heightened tariffs would weigh on risk assets.\u00a0<\/p>\n
Oil and gas producers remain unloved by the group, though that could change if a major geopolitical event upends supply lines. While such an outcome would bolster those sectors, the overall impact would likely be negative for risk assets, they said.<\/p>\n
\u201cAny geopolitical situation that can affect the price of oil is what will have the largest impact on the financial markets. Clearly both the Middle East and the Ukraine\/Russia situations can impact oil prices,\u201d said Scott Wren, senior global market strategist at Wells Fargo Investment Institute.<\/p>\n
Multiple respondents flagged European autos as a \u201cno-go\u201d area for 2026, citing intense competitive pressure from Chinese carmakers, margin compression and structural challenges in the transition to electric vehicles.\u00a0<\/p>\n
\u201cPersonally I don\u2019t believe for a minute that there will be a rebound in the sector,\u201d said Isabelle de Gavoty at Allianz GI.\u00a0<\/p>\n
Outside of those worries, most asset managers simply believe that there\u2019s little reason to fret about the upward momentum being interrupted \u2014 outside, of course, from the contrarian signal such near-uniform bullishness sends.<\/p>\n
\u201cEveryone seems to be risk-on at the moment, and that worries me a bit in the sense that the concentration of positions creates less tolerance for adverse surprises,\u201d said Amundi\u2019s Derambure. \u00a0<\/p>\n<\/div>\n
#bubble #Asset #managers #riskon #mode #stick #stocks<\/p>\n","protected":false},"excerpt":{"rendered":"
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