A regime of “controlled disorder”, where governments and businesses endeavour to maintain trade and investment flows, is expected to shape market sentiment over the year. Despite the fact we are at the late stages of the economic cycle, ongoing investment in artificial intelligence (AI), industrial policy shifts and easing monetary policy should sustain economic activity. Inflation has become a structural theme that investors may need to consider in allocations.
Diversification* remains one of the most effective tools to ongoing concentration in equity markets and elevated valuations.
Reforms, industrial policy shifts and increases in defence investment will likely redefine the European financial ecosystem and move it towards a more self-sustaining, long-term growth trajectory. Euro credit, infrastructure and strategic autonomy themes could offer opportunities for investors.
Global GDP is expected to remain resilient and moderate at 3% in 2026 as AI investment, shifts in industrial policy, tariff resilience and monetary policy easing extend the economic cycle. However, investors should remain mindful of equity concentration, valuation risks, increasing public debt, geopolitical friction and sticky inflation due to onshoring and the energy transition.
Our base case for 2026 is moderately pro-risk, supporting equities and investment grade credit. However, stretched valuations and underlying vulnerabilities call for selectivity. Portfolios may benefit from including:
Structural themes like reshoring, AI, electrification and demand for European private capital are expected to support private credit and infrastructure, both of which can provide inflation resilience and enhance income potential.
Capital expenditure in tech is expected to remain dominant in 2026, but the trend is broadening beyond the US towards China, Taiwan, India, Europe and Japan. We favour a combination of AI exposure, financials and industrials poised to benefit from increased investment, defence stocks linked to rising security spending, and green transition names.
US yields will likely remain range bound due to high levels of US debt, high inflation and concern around the Federal Reserve’s independence, once the new chair takes office. Therefore, we favour a tactical duration stance, complemented by inflation-protection instruments.
European government bonds, notably peripheral sovereigns and UK gilts, remain attractive to global investors. Euro investment grade credit with robust fundamentals also holds appeal; however, we remain cautious on US high yield - particularly where exposure is concentrated in regional banks or issuers reliant on consumer spending.
From a currency perspective, we forecast ongoing US dollar weakness as flows continue to shift out of US markets into Europe. However, we expect the dollar’s path to be non linear.
A weaker USD, potential US rate cuts and the growth edge in Emerging Markets (EM) support a constructive outlook for EM bonds and selective equities. EU reforms, together with rising defence and infrastructure spending across Europe, should create tangible opportunities in European credit and equities - particularly among small- and mid- cap stocks with attractive valuations and exposure to domestic spending trends.
High and growing US public debt, together with a weaker US dollar, will likely boost demand for global bond diversification. In this new paradigm we prefer European fixed income and, in the US, investment-grade credit over the more volatile US Treasuries.
Strong earnings growth, prospective Fed rate cuts, and greater-than-expected economic resilience underpin the rally. Given concentration and valuation risks, a global, diversified hunt for the winners in this transformative era is advisable.
Structural reforms, the defence and infrastructure push, and industrial policies aimed at strategic autonomy can reshape Europe’s macro-financial landscape. That shift could unlock opportunities in euro corporate credit, small- and mid-cap equities, and themes linked to defence, infrastructure, and strategic autonomy.
Growth premia and anticipated Fed cuts should support EM opportunities as geopolitical balances shift. EM bonds are attractive for high income and diversification, while EM equities present a broad range of prospects—from China’s tech and rare-earth sectors to India’s ‘Make in India’ transformation.
The AI-driven tech transformation is boosting energy demand even as economies shift toward net-zero, creating opportunities in climate-focused equities, sustainable infrastructure, and green bonds.
We live in an age of controlled disorder: a multipolar world being transformed by a technological revolution and fiscal divergence. Inflationary pressures are increasingly structural—fuelled by reshoring, the climate transition, and trade frictions—calling for selective risk-taking and broader diversification into FX, gold, and real assets.
* Diversification does not guarantee a profit or protect against a loss.
Source: Amundi Investment Institute, 2026 Investment Outlook - Keep it turning, November 2025.
Marketing material for professional investors only
Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 15 January 2026. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results.
Date of first use: 15 January 2026
Doc ID: 5133119
