Scarcity vs. abundance

Read details of our Q4 outlook:

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.