2026 Midyear Global Investment Outlook

Two bundles of cables going in different directions

2026 MIDYEAR INVESTMENT OUTLOOK

Could AI accelerate innovation and lift economic growth, ushering the world into a new era of abundance? Or will scarcity in power, labor, capital and materials dominate? Our 2026 Midyear Global Outlook looks at the big calls investors can’t avoid — and how the possibility of multiple, very different economic outcomes demand a portfolio rethink.

Read our 2026 midyear outlook Click to view the full 2026 midyear outlook report

Investment themes

01

AI scarcity

The AI buildout is accelerating, raising questions about bubbles, costs and who captures value. But whichever model wins, AI needs power, memory, chips and data centers — scarce inputs that are likely to shape investment opportunities.
02

Durable income

Yields have reset higher globally, making income an opportunity again. The key is how investors earn it. We prefer short- and medium-term Treasuries and credit where income is supported by clear cash flows, lender protections and recovery values.
03

Beyond labels

Investors may need to look beyond traditional asset-class labels to get the exposures they want. Thematic exposures don’t fit neatly into portfolio buckets: the same theme can appear across public and private markets, and across debt and equity. That makes the choice of vehicle part of the investment decision.

Read details of our 2026 Midyear Global Outlook

Paragraph-2

Paragraph-3

Paragraph-4,Advance Static Table-1,Advance Static Table-2

Scarcity now, abundance later?

We’re in a world of scarcity. Strengthening mega forces are putting increasing pressure on labor, energy, infrastructure, capital and materials. These supply-side constraints are shaping growth, inflation and market pricing. Meanwhile, AI raises the prospect of a permanent growth breakout by accelerating innovation itself. Yet the route to abundance, if we get there, runs through scarcity. A similar tension is playing out across other investment themes — and reshaping portfolios.

Investors face big macro calls that could lead to polyfurcated outcomes: multiple plausible paths and very different worlds. That means uncertainty across incompatible regimes, not just around a base case. Our Outlook focuses on six big calls: AI-led growth, AI cost, interest rates, debt, geopolitical chokepoints and U.S. leadership. Each contains competing narratives, and the calls are tightly linked: a view on one often implies a view on the others. Investors should understand which calls are embedded in their portfolios, size them deliberately and consider portfolio solutions that neutralize unwanted macro exposure.

Portfolio rethink needed

The new market dynamics are challenging the standard portfolio approach, and investors should think beyond asset-class labels.

Diversified exposure to the entire investable universe is a natural starting point for many portfolios. From there, investors can express views through deliberate exposures to themes and risks that cut across traditional asset classes. The final step is choosing the appropriate implementation vehicle, whether through active strategies, broad market indexes or subsets thereof, public or private markets, debt or equity, or other structures.

Granular approach raises potential payoff

Additional return with 20% more growth exposure than a 60/40 portfolio

These do not represent actual portfolios and do not constitute investment advice. The figures shown relate to simulated performance. Index returns do not reflect management fees, transaction costs or expenses. One cannot invest directly in an index.

Source: BlackRock Investment Institute with data from LSEG Datastream, June 2026. Note: The chart illustrates the hypothetical pickup in annualized returns from increasing a hypothetical 60/40 portfolio’s exposure to economic growth by 20% either by: upping allocation to U.S. equities by 20%, and getting that exposure by allocating to sectors with perfect foresight. Index proxies used are: MSCI USA for U.S. equities, Bloomberg US Treasury Index for U.S. bonds and S&P 500 Information Technology, Consumer Discretionary, Communication Services, Material, Financials, Health Care, Consumer Staples, Utilities, Industrials and Energy indexes for sectors. This analysis is done with the benefit of hindsight.

AI scarcity

The AI buildout is accelerating, bringing three unresolved questions into focus. First, is AI becoming a bubble? Outsized gains leave little room for disappointment, making earnings and margin delivery critical for U.S. equities. Second, how costly will AI be? Models may become cheaper and speed up adoption, yet we still do not have enough compute to meet demand. Third, who will capture the value? Model builders, cloud and chip providers, power and data-center owners may all capture part of the economics. AI could also create new pools of revenue beyond the technology sector, and we don’t yet know where those will accrue.

The answers to these questions depend in large part on the constraints that will shape AI costs, adoption and value capture.

Dispersion across the AI value chain

Total return ranges and averages in AI value-chain layers, 2023-26

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results.

Source: BlackRock Investment Institute with data from Bloomberg, June 2026. Notes: Bars show the range between the highest and lowest three-year total returns within each AI value-chain layer; black markers show the average return. Hyperscalers are represented by Amazon, Alphabet, Meta and Microsoft. Data centres include data-centre operators, REITs and related service providers. Chips & semis include semiconductor companies only and exclude equipment manufacturers and design software firms. Software apps include enterprise AI software and AI productivity companies.

We seek broad exposure to the AI buildout through an overweight in U.S. equities. Even if the ultimate winners are unclear, many are likely to be found there. Second, we turn to active investing as returns diverge across the AI value chain, creating widening gaps between winners and losers. See the chart. Some opportunities sit outside the U.S., including EM and small caps. Third, we focus on AI scarcity. We do not need to know which AI model wins to know AI requires power, memory, chips and data-center infrastructure.

Durable income

We see higher interest rates as a defining feature of the new regime. With yields steadily resetting higher around the world, income is an opportunity again.

Scarcity keeps inflation sticky in both the long and short term, due to tight labor markets and demand for scarce resources. That makes the Fed less likely to cut rates soon. And markets have moved away from the rate-cut expectations that prevailed earlier this year.

Long bonds face an additional challenge. Heavy debt issuance and mounting debt loads mean investors are likely to demand a higher term premium — the extra yield for holding long-term bonds. They can still rally when stocks drop on concerns about the strength of consumption or bubble risk. But they no longer carry the ballast investors came to expect because of sticky inflation from supply shocks. This makes long bonds a risk that needs to be sized deliberately rather than treated as a default hedge. All this creates an opportunity in short- and medium-term Treasuries. They carry a much higher yield relative to volatility, as the chart shows.

Pick your spot for income

Risk-adjusted yields of selected fixed income, 2004-2026

The figure shown relates to past performance. Past performance is not a reliable indicator of future results. Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.

Source: BlackRock Investment Institute with data from LSEG Datastream and Lincoln, June 2026. Note: Yield per unit of volatility is calculated as yield divided by the full-sample annualized standard deviation of monthly total returns for public market bonds and quarterly for private credit. Index proxies used: Bloomberg U.S. Treasury 1–3 Year Index for short-term U.S. Treasures, Bloomberg U.S. Treasury Non-Callable 10+ Year Index for Long-term U.S. Treasuries, JPMorgan GBI-EM Diversified for local-currency emerging market debt, and Lincoln Senior Debt for private credit.

We focus on credit where income is supported by clear cash flows, lender protections and recovery values across public and private markets. Infrastructure also belongs in the income toolkit as it offers regulated or contracted cash flows, often linked to inflation.

Beyond labels

In a world of scarcity, investors need to go beyond labels to get the exposures they want. Infrastructure is the clearest proof point: it sits at the intersection of AI demand, energy constraints and inflation-linked cash flows.

AI is increasing demand for data centers, power and grids. Geopolitical fragmentation is raising the value of domestic capacity, including ports. And the energy transition requires new generation, storage and networks. Together, these forces give infrastructure exposure to scarce capacity, inflation-linked income and multiple mega forces simultaneously. But these thematic exposures don’t fit neatly into traditional portfolio buckets. The same exposure can appear across public and private markets and across debt and equity.

Raising infrastructure exposure

Hypothetical portfolio allocations to infrastructure

For illustrative purposes only. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise - or even estimate - of future performance.

Source: BlackRock Investment Institute, Preqin, Bloomberg. January 2026. Note: The chart shows what recommended portfolio allocations to infrastructure could look like under various scenarios, with the two main variables being (1) the general level of illiquidity tolerance and therefore appetite for private assets, and (2) the willingness to take on deliberate infrastructure exposure over and above what is implicitly baked-in major asset classes.

Read our Q2 outlook in charts (PDF) Read our Q2 outlook in charts (PDF)

Asset class implications

Key investment views

Our highest conviction views, June 2026

Driver	What we think	Portfolio expression
Growth and AI scarcity	The AI buildout is speeding up, making bottlenecks binding.	Overweight U.S. equities; focus on AI bottleneck opportunities: power, chips and data centers.
Duration and diversification	Long bonds carry high rate sensitivity and are less reliable diversifiers.	Prefer short- and medium-term government bonds over long bonds for income.
Credit spreads and liquidity	Selectivity is crucial amid tight spreads and uneven fundamentals.	Credit with clear cash flows, lender protections and recovery value; higher-rated high yield.
Inflation and scarcity	Scarcity, secure supply and power demand carry inflation risks.	Infrastructure, energy bottlenecks, EM local debt and real-asset-linked exposures.
Alpha opportunity	Wider dispersion and macro uncertainty raise value of active skill.	Macro hedge funds, venture capital, market-neutral strategies, and selected private credit and non-U.S. alpha.

Tactical granular views table (U.S.)

Six- to 12-month tactical positioning, June 2026

Search views

Asset		Tactical view	Commentary
Equities
United States			We are overweight. Strong corporate earnings, fueled by the AI buildout and a favorable macro backdrop, are outpacing higher interest rate expectations.
Europe			We are neutral. We would need to see more business-friendly policy and deeper capital markets for Europe to outperform. We favor financials, infrastructure, and industrials.
UK			We are neutral. Valuations remain attractive relative to the U.S., but we see few near-term catalysts to trigger a shift.
Japan			We are neutral. Strong corporate balance sheets and governance reforms remain supportive. We prefer targeted exposures to physical AI and the buildout’s bottlenecks.
Emerging markets			We are neutral. We see opportunities where the AI buildout drives demand for infrastructure, particularly in Latin America.
China			We are neutral. We see opportunities in physical AI. Cheap, open-source AI could drive adoption, but that doesn’t necessarily translate into AI-provider profitability.
Fixed income
Short U.S. Treasuries			We are neutral. We prefer short- and medium-term Treasuries, given the attractive risk-adjusted income on offer.
Long U.S. Treasuries			We are underweight. We see investors wanting more compensation for holding long-term bonds amid persistent inflation and high debt loads. Long-duration bonds also are a less reliable portfolio diversifier in the new regime.
Global inflation-linked bonds			We are neutral. We see inflation settling above pre-pandemic levels, but markets may not price this in the near term as economic growth could slow.
Euro area government bonds			We are overweight short- and medium-term bonds. Markets are pricing restrictive policy rates of about 3% for several years. We think that’s overdone.
UK gilts			We are neutral. We expect periods of elevated volatility given political uncertainty, longer-term bonds making up a larger market share, and buyers becoming more price-sensitive.
Japanese government bonds			We are underweight. Rate hikes, higher global term premium and heavy bond issuance will likely drive yields up further.
China government bonds			We are neutral. China bonds offer stability and diversification but developed market yields are higher. A shift in investor sentiment toward equities limits upside.
U.S. agency MBS			We are overweight. Agency MBS offer higher income than Treasuries with similar risk and may offer more diversification amid fiscal and inflationary pressures.
Short-term IG credit			We are neutral. Spreads are tight due to corporate strength; they could widen if issuance increases or risk appetite shifts.
Long-term IG credit			We are underweight. We prefer short-term bonds less exposed to interest rate risk over long-term bonds.
Global high yield			We are neutral. High yield offers attractive income. We prefer higher-rated U.S. and European high yield over investment grade and see dispersion of returns increasing.
Asia credit			We are neutral. Overall yields are attractive and fundamentals are solid, but spreads are tight.
Emerging hard currency			We are neutral. Fundamentals have improved, but we see a more attractive risk-reward profile in EM local debt.
Emerging local currency			We are overweight. We like the yield relative to its volatility and improving fundamentals.

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Note: Views are from a U.S. dollar perspective. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast or guarantee of future results. This information should not be relied upon as investment advice regarding any particular fund, strategy or security.