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Three investment lessons for 2026
Market take
Weekly video_20260105
Natalie Gill
Portfolio Strategist, BlackRock Investment Institute
Opening frame: What’s driving markets? Market take
Camera frame
Three main lessons stand out: immutable economic laws limit policy extremes, mega forces – especially AI – overshadow traditional macro anchors, and the rise of tokenized assets show a fast-changing financial system.
Title slide: Three investment lessons for 2026
1: World can’t change fast
US stocks held up in what turned out to be an eventful year. The April 2nd tariff announcement triggered the S&P 500’s worst week since the pandemic, yet equities still ended the year with double-digit gains. Government bonds also delivered as yields fell despite some fiscal worries and persistent inflation.
A softer dollar and Federal Reserve policy easing helped boost international stocks. Gold surged about 60% as investors rethought what diversification means in this new market regime, and the AI buildout accounted for roughly half of US GDP growth.
We think the resilience of the US economy stems in part from our first lesson: immutable economic laws mean the world can’t change quickly. We saw this play out in real-time as policy uncertainty weighed on investors, until one of these immutable laws – supply chains can’t be rewired overnight – prevented the maximal stance on tariffs and helped stocks recover.
2: Mega forces trump the macro
Recession fears were front and center at the beginning of the year. Yet growth stayed resilient because mega forces – led by AI – outweighed the macro backdrop. The macro anchors that helped guide investors for decades, such as stable inflation and fiscal discipline, have weakened.
In this environment, there is no ''neutral'' portfolio allocation. We think investors should focus more on owning risk deliberately instead of spreading it indiscriminately. That means owning a view on AI winners and losers and seeking unique return sources – like private markets and hedge funds.
3: Future of finance rapidly evolving
The future of finance mega force is evolving faster than expected as stablecoin adoption and the tokenization of assets rise. The 2025 Genius Act provides the first US legislation for stablecoins but bars interest payments - though a ''marketing-rewards'' provision allows for yield-like incentives. This could allow for competition with bank deposits and money market funds.
Outro: Here’s our Market take
2025 was a year that pushed limits on multiple fronts, from the constraints of trade policy early in the year to the advancement of the AI theme. We plan to keep tracking this theme into the new year and stay risk-on.
Closing frame: Read details: blackrock.com/weekly-commentary
Our three lessons
We see three lessons after a volatile 2025: immutable laws constrain extremes; mega forces trump the macro; and the financial system is evolving fast.
Market backdrop
US stocks climbed 16.6% for a third straight year of double-digit gains. US 10-year Treasury yields ended the year around 4.15% after data-driven swings.
Week ahead
The US economic calendar begins to normalise this week. December payrolls will help to clarify the labor market picture after the noisy delayed releases.
2025 marked the third straight year of double-digit stock gains even with elevated policy uncertainty in the first half of the year. We see three key lessons. First: immutable economic laws, such as supply chains can’t be rewired quickly, limit policy extremes. Second: mega forces – especially AI, the dominant mega force – trump traditional macro. Third: stablecoins and tokenization of assets show a rapidly evolving financial system. These all require a new investment approach.
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AI boost
Contributions to annual US GDP growth, 2000-2025
Source: BlackRock Investment Institute, US Bureau of Economic Analysis, with data from Haver Analytics, September 2025. Note: The bars show the contribution of various factors to annual US GDP growth. The bar for 2025 shows the contribution through the first half of 2025.
2025 was a unique year for markets. The April 2 tariff announcements sparked the worst one-week selloff in the S&P 500 since the pandemic, yet stocks posted double-digit gains for the third year in a row. US Treasuries also delivered solid returns even as fiscal pressures and sticky inflation caused investors to demand more term premium. Higher term premium hurt the US dollar, raising questions about its reserve currency status. Those questions subsided, as we anticipated, but a weaker US dollar and Federal Reserve policy easing boosted global stocks: the MSCI EM Index rose 30% versus the S&P 500’s 16%, in dollar terms. Gold surged over 60% in a risk-on year as a diversification play became a return driver. And the AI buildout drove about half of US growth, with investment’s contribution to GDP nearly triple its 2000 to 2019 average. See the chart. Why such resilience?
We think the US economy’s resilience partly stems from our first lesson: immutable economic laws – such as supply chains can’t be rewired overnight – mean the world can’t change quickly. Markets were whipsawed many times this year, but we thought such laws would prevent a maximal stance on tariffs and other policy changes that sparked so much uncertainty in the first half of the year. That played out: US stocks rebounded from April’s selloff, with the S&P 500 gaining 16% last year.
Powerful mega forces can trump the macro
Our second lesson – powerful mega forces can trump the macro – helped us look through the noise and kept us pro-risk on the strength of the AI theme, another call that played out. The macro anchors that markets relied on for decades, like stable inflation expectations and fiscal discipline, have weakened. Instead, a few mega forces are driving structural transformation, with AI emerging as the dominant one. Because there is no “neutral” portfolio allocation in this environment, investors should focus on owning their risk deliberately rather than spreading it – a more active approach, in our view. Identifying manager skill will be key for spotting those who can find the winners as AI gains spread across the economy, as well as for other idiosyncratic sources of return like private markets and hedge funds.
We also see the future of finance mega force evolving far more rapidly than expected – our third lesson – as adoption of stablecoins and tokenization increases. The 2025 Genius Act established the first US framework for payment stablecoins – digital tokens pegged to a fiat currency and backed by liquid reserves. The law bars interest payments, but a “marketing rewards” provision permits yield-like incentives. That allows competition with bank deposits or money market funds, potentially impacting how banks provide credit and current global payment systems. If broadly adopted in emerging markets as a local currency alternative, stablecoins pegged to the US dollar could even help cement its reserve currency status and partly offset current negative sentiment and positioning on the dollar. Tokenization, which involves recording asset ownership on digital ledgers, allows for instant settlement and could widen access to illiquid private market asset classes.
Our bottom line
2025 pushed limits on multiple fronts, with constraints biting in some cases (trade policy) and new ground broken on others (AI investment and financial innovation). We track these mega forces into 2026 and stay risk-on for now.
Market backdrop
The S&P 500 surged 16.6% in 2025. Mega cap tech names remained the key drivers of the AI theme, though concerns over frothy valuations made it a bumpy ride: Nvidia’s market cap at one point lost 35% before the firm became the world’s first $5 trillion company. Markets expect more Fed policy easing and have slashed their year-end 2026 rate expectations to about 3%, LSEG data show. US 10-year Treasury yields fell 42 basis points during the year to 4.15%.
The US data calendar starts to normalise this week, with the regularly scheduled payrolls data for December coming out at its usual time on Friday. We eye a cleaner read on the labor market and inflation in coming months given the noise of the October-November data. For example, the unemployment rate rose to 4.6% in November – yet some of this was the temporary impact of the government shutdown and could be quickly reversed.
Week ahead
Past performance is not a reliable indicator of current or future results. Indexes are unmanaged and do not account for fees. It is not possible to invest directly in an index. Sources: BlackRock Investment Institute, with data from LSEG Datastream as of December 31, 2025. Notes: The two ends of the bars show the lowest and highest returns at any point year to date, and the dots represent current year-to-date returns. Emerging market (EM), high yield and global corporate investment grade (IG) returns are denominated in US dollars, and the rest in local currencies. Indexes or prices used are: spot Brent crude, ICE US Dollar Index (DXY), spot gold, spot bitcoin, MSCI Emerging Markets Index, MSCI Europe Index, LSEG Datastream 10-year benchmark government bond index (US, Germany and Italy), Bloomberg Global High Yield Index, J.P. Morgan EMBI Index, Bloomberg Global Corporate Index and MSCI USA Index.
Jan. 5
US Jan. ISM manufacturing PMI
Jan. 6
US Jan. ISM services PMI
Jan. 7
US Nov. job openings; US trade
Jan. 9
US Dec. payrolls
Read our past weekly commentaries here.
Big calls
Our highest conviction views on six- to 12-month (tactical) and over five-year (strategic) horizons, January 2026
| Reasons | ||
|---|---|---|
| Tactical | ||
| Still favor AI | We see the AI theme supported by strong earnings, resilient profit margins and healthy balance sheets at large listed tech companies. Continued Fed easing into 2026 and reduced policy uncertainty underpin our overweight to US equities. | |
| Select international exposures | We like Japanese equities on strong nominal growth and corporate governance reforms. We stay selective in European equities, favoring financials, utilities and healthcare. In fixed income, we prefer EM due to improved economic resilience and disciplined fiscal and monetary policy. | |
| Evolving diversifiers | We suggest looking for a “plan B” portfolio hedge as long-dated US Treasuries no longer provide portfolio ballast – and to mind potential sentiment shifts. We like gold as a tactical play with idiosyncratic drivers but don’t see it as a long-term portfolio hedge. | |
| Strategic | ||
| Portfolio construction | We favor a scenario-based approach as AI winners and losers emerge. We lean on private markets and hedge funds for idiosyncratic return and to anchor portfolios in mega forces. | |
| Infrastructure equity and private credit | We find infrastructure equity valuations attractive and mega forces underpinning structural demand. We still like private credit but see dispersion ahead – highlighting the importance of manager selection. | |
| Beyond market cap benchmarks | We get granular in public markets. We favor DM government bonds outside the US Within equities, we favor EM over DM yet get selective in both. In EM, we like India which sits at the intersection of mega forces. In DM, we like Japan as mild inflation and corporate reforms brighten the outlook. | |
Note: Views are from a US dollar perspective, January 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
Six- to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, January 2026
We have lengthened our tactical investment horizon back to six to 12 months. The table below reflects this and, importantly, leaves aside the opportunity for alpha, or the potential to generate above-benchmark returns – especially at a time of heightened volatility.
| Asset | Tactical view | Commentary | ||||
|---|---|---|---|---|---|---|
| Equities | ||||||
| United States |  |
We are overweight. Strong corporate earnings, driven in part by the AI theme, are supported by a favorable macro backdrop: continued Federal Reserve easing, broad economic optimism and less policy uncertainty, particularly on the trade front. | ||||
| Europe |  |
We are neutral. We would need to see more business-friendly policy and deeper capital markets for recent outperformance to continue and to justify a broad overweight. We stay selective, favoring financials, utilities and healthcare. | ||||
| UK | |
We are neutral. Valuations remain attractive relative to the US, but we see few near-term catalysts to trigger a shift. | ||||
| Japan | |
We are overweight. Strong nominal GDP, healthy corporate capex and governance reforms – such as the decline of cross-shareholdings – all support equities. | ||||
| Emerging markets | |
We are neutral. Economic resilience has improved, yet selectivity is key. We see opportunities across EM linked to AI and the energy transition and see the rewiring of supply chains benefiting countries like Mexico, Brazil and Vietnam. | ||||
| China | |
We are neutral. Trade relations with the US have steadied, but property stress and an aging population still constrain the macro outlook. Relatively resilient activity limits near-term policy urgency. We like sectors like AI, automation and power generation. We still favor China tech within our neutral view. | ||||
| Fixed income | ||||||
| Short US Treasuries | |
We are neutral. We see other assets offering more compelling returns as short-end yields have fallen alongside the US policy rate. | ||||
| Long US Treasuries |  |
We are underweight. We see high debt servicing costs and price-sensitive domestic buyers pushing up on term premium. Yet we see risks to this view: lower inflation and better tax revenues could push down yields near term. | ||||
| Global inflation-linked bonds | |
We are neutral. We think inflation will settle above pre-pandemic levels, but markets may not price this in the near-term as growth cools. | ||||
| Euro area government bonds | |
We are neutral. We agree with market forecasts of ECB policy and think current prices largely reflect increased German bond issuance to finance its fiscal stimulus package. We prefer government bonds outside Germany. | ||||
| UK Gilts | |
We are neutral. The recent budget aims to shore up market confidence through fiscal consolidation. But deferred borrowing cuts could bring back gilt market volatility. | ||||
| 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 and investor sentiment shifting towards equities limits upside. | ||||
| US 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. Corporate strength means spreads are low, but they could widen if issuance increases and investors rotate into US Treasuries as the Fed cuts. | ||||
| 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 more attractive carry in an environment where growth is holding up – but we think dispersion between higher and weaker issuers will increase. | ||||
| Asia credit | |
We are neutral. Overall yields are attractive and fundamentals are solid, but spreads are tight. | ||||
| Emerging hard currency | |
We are overweight. A weaker US dollar, lower US rates and effective EM fiscal and monetary policy have improved economic resilience. We prefer high yield bonds. | ||||
| Emerging local currency | |
We are neutral. A weaker US dollar has boosted local currency EM debt, but it’s unclear if this weakening will persist. | ||||
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 US 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.
Euro-denominated tactical granular views
Six to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, January 2026
| Asset | Tactical view | Commentary | ||
|---|---|---|---|---|
| Equities | ||||
| Europe ex UK | |
We are neutral. We would need to see more business-friendly policy and deeper capital markets for recent outperformance to continue and to justify a broad overweight. We stay selective, favoring financials, utilities and healthcare. | ||
| Germany | |
We are neutral. Increased spending on defense and infrastructure could boost the corporate sector. But valuations rose significantly in 2025 and 2026 earnings revisions for other countries are outpacing Germany. | ||
| France | |
We are neutral. Political uncertainty could continue to drag corporate earnings behind peer markets. Yet some major French firms are shielded from domestic weakness, as foreign activity accounts for most of their revenues and operations. | ||
| Italy | |
We are neutral. Valuations are supportive relative to peers. Yet we think the growth and earnings outperformance that characterized 2022-2023 is unlikely to persist as fiscal consolidation continues and the impact of prior stimulus peters out. | ||
| Spain | |
We are overweight. Valuations and earnings growth are supportive relative to peers. Financials, utilities and infrastructure stocks stand to gain from a strong economic backdrop and advancements in AI. High exposure to fast-growing areas like emerging markets is also supportive. | ||
| Netherlands | |
We are neutral. Technology and semiconductors feature heavily in the Dutch stock market, but that’s offset by other sectors seeing less favorable valuations and a weaker earnings outlook than European peers. | ||
| Switzerland |  |
We are neutral. Valuations have improved, but the earnings outlook is weaker than other European markets. If global risk appetite stays strong, the index’s tilt to stable, less volatile sectors may weigh on performance. | ||
| UK | |
We are neutral. Valuations remain attractive relative to the U.S., but we see few near-term catalysts to trigger a shift. | ||
| Fixed income | ||||
| Euro area government bonds | |
We are neutral. Yields are attractive, and term premium has risen closer to our expectations relative to US Treasuries. Peripheral bond yields have converged closer to core yields. | ||
| German bunds | |
We are neutral. Potential fiscal stimulus and bond issuance could push yields up, but we think market pricing reflects this possibility. Market expectations for near-term policy rates are also aligned with our view. | ||
| French OATs | |
We are neutral. France faces continued challenges from elevated political uncertainty, high budget deficits and slow structural reforms, but these risks already seem priced into OATs and we don’t expect a worsening from here. | ||
| Italian BTPs | |
We are neutral. The spread over German bunds looks tight given its large budget deficits and growing public debt. Domestic factors remain supportive, with growth holding up relative to the rest of the euro area and Italian households showing solid demand to hold BTPs at higher yields. Domestic political pushback likely prevents defense spending from rising to levels that would resurface fiscal stability concerns. | ||
| UK gilts | |
We are neutral. Gilt yields are off their highs, but we expect more market attention on long-term yields through the government’s November budget, given the difficulty it has had implementing spending cuts. | ||
| Swiss government bonds | |
We are neutral. Markets are expecting policy rates to return to negative territory, which we deem unlikely. | ||
| European inflation-protected securities | |
We are neutral. We see higher medium-term inflation, but inflation expectations are firmly anchored. Cooling inflation and uncertain growth may matter more near term. | ||
| European investment grade | |
We are neutral on European investment grade credit, favoring short- to medium-term paper for quality income. We prefer European investment grade over the US Quality-adjusted spreads have tightened significantly relative to the US, but they remain wider, and we see potential for further convergence. | ||
| European high yield | |
We are overweight. The income potential is attractive, and we prefer European high yield for its more appealing valuations, higher quality and less sensitivity to interest rate swings compared with the US Spreads adequately compensate for the risk of a potential rise in defaults, in our view. | ||
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 euro perspective, January 2026. 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.
Meet the authors
Jean Boivin
Head – BlackRock Investment Institute
Wei Li
Global Chief Investment Strategist – BlackRock Investment Institute
Glenn Purves
Global Head of Macro – BlackRock Investment Institute
Natalie Gill
Portfolio Strategist – BlackRock Investment Institute
This material is for distribution to Professional Clients (as defined by the FCA Rules) and should not be relied upon by any other persons.
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Sources: Bloomberg unless otherwise specified.
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