Our market view
Global growth has remained resilient despite trade wars and significantly elevated tariffs in parts of the economic system. This, in turn, has triggered an inflationary impulse that we view as transitory. Monetary and fiscal policies continue to stimulate the economy but are also contributing to rising debt levels. The corporate sector has demonstrated strong adaptability to these new conditions, delivering better earnings than expected – particularly in the U.S., where profit growth has surpassed even high forecasts. Investors remain highly focused on structural forces within AI; growth is impressive, yet the scale of investments raises concerns. The tech industry continues to generate substantial profits while committing to massive capital expenditures. Will these commitments pay off? The past two quarters have seen sharply rally in equity markets and a notable increase in risk appetite among investors. Overall, several positive structural drivers are at play, even as the risk landscape remains complex and valuations demand strong performance through 2026.
Our portfolio
The economic situation has gradually stabilized since the concerns surrounding Liberation Day. Monetary and fiscal initiatives remain supportive, helping to stabilize the economy, while the corporate sector once again demonstrates a remarkable degree of adaptability. Equity markets are pricing in 2026 as a year with positive prospects for corporate earnings – both in terms of growth and in the broadening of regions and sectors contributing to these gains. Investor risk appetite and asset valuations have increased markedly, even as significant uncertainty around 2026 persists. We balance this environment with a portfolio slightly overweight in equities, complemented by a cautious allocation to fixed-income instruments and liquid alternative investments. We advocate a broadly diversified approach, anticipating periods of heightened volatility throughout the year.
Equities and valuations
After a strong first half, equity markets have lost momentum in November, weighed down by delayed rate cuts and concerns surrounding massive AI-related investments. Hyperscalers such as Microsoft, Amazon, and Alphabet are making substantial AI investments – capital flows that now drive both equity markets and the U.S. economy. The key question is whether these investments will generate returns sufficient to justify current valuations. Earnings growth remains robust, particularly in tech and financials, but the heavy concentration in a handful of stocks poses challenges for portfolio managers. Europe continues to trail with weaker growth, while Asia dominates among emerging markets. Looking ahead, European earnings are expected to rise by just over 10% next year, in line with the U.S. and global benchmarks. Global economic growth will likely remain steady, though insufficient to boost profits through higher sales. However, gains in productivity driven by digitalization and AI, combined with increased defense and infrastructure spending, support expectations for continued solid earnings growth.
