September 15, 2026 | Global government bond yields have broken higher as sovereign borrowing competes with private financing needs led by AI. Yet equities are resilient, supported by solid AI-led earnings growth. We stay constructive on risk but are increasingly selective, favoring AI bottlenecks, shorter-term bonds and opportunities beyond asset class labels.
Scarcity vs. abundance
Investment themes
01.
AI scarcity
The AI buildout is accelerating, bringing binding constraints forward. We stay overweight U.S. equities and upgrade emerging market stocks to overweight but stay focused on opportunities driven by bottlenecks.
02.
Durable income
Global government bond yields have surged through the summer. Higher yields have restored income opportunities, but only via a flexible approach. We prefer short-term bonds over long-term bonds with high sensitivity to interest rates.
03.
Beyond labels
Asset-class buckets are a less useful starting point in a world shaped by mega forces. Infrastructure shows why: Its exposure to AI demand, energy security and fragmentation runs across markets and asset classes.
Read details of our Q4 outlook:
Drivers of growth and rates converge
The AI investment boom is having two broad impacts: lifting activity and earnings while absorbing more capital, power, materials and balance-sheet capacity. Heavy sovereign borrowing is adding to the demand for funding. The result is a higher cost of capital even as AI boosts growth.
These developments reinforce our core Midyear Outlook themes: AI has the potential to deliver a sustained increase in growth and productivity, but that path to abundances runs through scarcity in capital, materials and labor.
Competition for capital is intensifying
Supply of U.S. financial securities, 1946-2030
Source:
BlackRock Investment Institute, U.S. Congressional Budget Office, Federal Reserve, EIA, with data from PitchBook. Note: The chart shows the net supply of U.S. securities from 1946 onwards. The analysis uses net transaction flows rather than gross issuance. For equity, the measure is gross issuance minus share repurchases and equity retired through mergers and acquisitions. Negative values represent equity retirement. Estimated future debt is rolled forward by net issuance. Estimated future equity is rolled forward by net issuance only, which assumes no valuation change.
Inflation pressure persists
The pressure is not confined to capital. U.S. labor supply is also constrained: the pace of job creation needed to keep unemployment steady has fallen, making recent payroll gains strong relative to supply. Wage growth and underlying inflation remain elevated. That leaves the Federal Reserve with less room to ease and keeps the risk of further tightening in play if price pressures persist.
Strengthening activity keeps inflation pressure firm
U.S. wage and PCE inflation, 2015-2026
Source:
BlackRock Investment Institute, U.S. Bureau of Labor Statistics (BLS), U.S. Bureau of Economic Analysis (BEA), with data from Haver Analytics, September 2026. Note: The lines show the annual change in core inflation, core services excluding shelter inflation and wages. Inflation is measured using personal consumption expenditures (PCE). Wage growth captures the annual change in average hourly earnings.
Strong earnings cushion equities
U.S. earnings expectations continue to rise, with AI-linked companies accounting for a large share of year-ahead growth. That helps explain why equities have absorbed higher yields far better than in 2022. We remain constructive on AI, while focusing on bottlenecks and infrastructure as financing needs and capital intensity rise.
AI-powered earnings surge
S&P 500 trailing earnings growth by AI category
Source:
The figure shown relates to past performance. Past performance is not a reliable indicator of current or future results. Index returns do not reflect management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index. Source: BlackRock Investment Institute, Massachusetts Institute of Technology (MIT), August 2026. Note: S&P 500 categories are determined using large language model analysis on 10-K filings and an AI-adoption classification framework from an MIT paper Artificial Intelligence Adoption and Firm Outcomes . Earnings growth is based on trailing earnings, indexed to January 2023 = 100.
Income restored - but via a flexible approach
Higher yields have made income an opportunity again, but we do not treat all duration equally. We prefer short-term bonds to long-term government bonds, where heavy issuance and term-premium risk can amplify volatility. Credit also demands selectivity as dispersion rises beneath tight headline spreads.
Income is back on the table
Share of fixed income assets yielding over 4%
Source:
The figure shown relates to past performance. Past performance is not a reliable indicator of current or future results. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Source: BlackRock Investment Institute, with data from LSEG Datastream as of August 31, 2026. Notes: The bars show market capitalization weights of assets with an average annual yield over 4% in a select universe that represents about 70% of the Bloomberg Multiverse Bond Index. Core government comprises U.S. Treasuries and euro core government bonds; U.S. government-related comprises agencies and municipals; U.S. residential and commercial mortgage-backed securities (MBS & CMBS) comprises both securitized sectors; Global high yield and emerging market debt also includes euro periphery government bonds.
Refinancing raises the bar
Much of the debt now coming due was issued when interest rates were far lower. Refinancing at today’s yields can pressure projects and companies that need more immediate cash generation, including parts of the AI buildout and private markets. That makes financing structure and manager selection increasingly important.
Refinancing pressure looms
Data center asset-backed debt issuance, 2020-2026
Source:
BlackRock Investment Institute, with data from Citi, LSEG Datastream, August 2026. Note: The chart shows data center asset-backed security (ABS) issuance. The line shows the change in five-year U.S. Treasury yields between each year's issuance and current five-year yields. Five-year yields best reflects the average duration of data center ABS deals.
Authors
Jean Boivin
Head of BlackRock Investment Institute
Wei Li
Global Chief Investment Strategist, BlackRock Investment Institute
Vivek Paul
Global Head of Portfolio Research – BlackRock Investment Institute