Q4 Global Investment Outlook

Two bundles of cables going in different directions

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 selective, favoring AI bottlenecks, shorter-term bonds and opportunities beyond asset class labels.

Read our Q4 update to the 2026 outlook (PDF) Read our Q4 update to the 2026 outlook (PDF)

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:

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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.

From drivers to portfolio expressions

Our highest conviction views, September 2026

Driver	What we think	Portfolio expression
Growth and AI scarcity	The AI buildout is speeding up, making bottlenecks binding.	Overweight U.S. and EM 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	Macro outcomes matter again in the new regime.	Macro hedge funds, venture capital, market-neutral strategies, and selected private credit and non-U.S. alpha.

Note: Views are from a U.S. dollar perspective, September 2026. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any particular funds, strategy or security.

Tactical granular views table (U.S.)

Six- to 12-month tactical positioning, September 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 overweight. Strong earnings and cheaper valuations create opportunities. We particularly like different expressions of the AI scarcity theme across Asia and 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 neutral short- and medium-term bonds. Current ECB rate pricing looks fairly valued given the balance of risks. Higher energy prices could push rates higher. We prefer to deploy risk elsewhere.
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.

Source: 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.