Quarterly Insights: 2025 vs. 2026: Spot the Differences

CIO Perspective

High valuations raise the question of how markets are likely to perform in 2026. If markets performed strongly in 2025 despite valuations, can they do so again in 2026? The answer to that question may come down to how well the market handles what’s different between the two years.

Also in today’s newsletter:

• AI Infographic: We take a closer look at the plunge into AI investing. Despite significant free cash flow and expected bond issuance, there may be a funding gap. Questions also surround AI integration.
• Investment Grade: With credit spreads near multi-decade tights, security selection and tactical reallocation will likely be paramount in 2026. We expect technicals to become less positive this year; inflows should continue, but AI and M&A funding could significantly increase net issuance.
• High Yield: In our view, a resilient US economy, healthy corporate profit growth and benign defaults underpin a supportive fundamental backdrop for high yield.
• Private Equity: We believe private equity deal flow will remain robust, while exits experience an uptick and fundraising improves especially for GPs with healthy track records.

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Past performance is no guarantee of future results. Investments involve varying degrees of risk and may lose value.

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