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266. 2026 Midyear Outlook: Scarcity vs. Abundance in the Age of AI
Web title: 2026 Midyear Outlook: Scarcity vs. Abundance in the Age of AI
Full episode description:
Artificial intelligence continues to reshape economies and markets, but its rapid expansion is also exposing new constraints across energy, infrastructure, labor, and capital. As investors navigate an increasingly complex landscape, the debate has shifted from AI's potential to the practical realities of building the systems that support it.
In this episode of The Bid, host Oscar Pulido speaks with Jean Boivin, Head of the BlackRock Investment Institute, about BlackRock's 2026 Midyear Outlook. Together they examine the report's central theme - scarcity versus abundance - and discuss how AI, higher capital requirements, geopolitics, and structural economic changes are influencing today's investment landscape.
Jean explains why today's market environment is defined by multiple competing outcomes rather than a single base case, introducing the concept of polyfurcation. He also explores the evolving AI investment opportunity, the importance of infrastructure, the role of tactical portfolio construction, and why investors may need to rethink traditional diversification as megaforces continue to reshape markets.
Key insights
How AI is creating both new opportunities and new economic constraints
Why scarcity has become a defining macroeconomic theme
How polyfurcation changes the way investors think about uncertainty
Why infrastructure is becoming central to the AI investment story
How portfolios may evolve beyond traditional asset class diversification
Where investors are focusing as AI continues to reshape global markets
Keywords: AI investing, Midyear Outlook, capital markets, infrastructure investing, megaforces, stock market trends, artificial intelligence, global economy
Sources: BlackRock Investment Institute, Midyear Outlook 2026
Written Disclosures In Episode Description:
This content is for informational purposes only and is not an offer or a solicitation. Reliance upon information in this material is at the sole discretion of the listener. Reference to any company or investment strategy mentioned is for illustrative purposes only and not investment advice. For full disclosures, visit blackrock.com/corporate/compliance/bid-disclosures.
<<TRANSCRIPT>>
Oscar Pulido: Just six months ago, investors were asking how quickly artificial intelligence could transform the global economy. Today, the conversation has become more complicated. AI continues to reshape business and markets, but it also demands enormous amounts of power, capital, infrastructure, and skilled labor. At the same time, geopolitical fragmentation, aging populations, and rising debt are creating new constraints across the global economy.
So, are we entering an era of abundance powered by AI or a period where scarcity becomes the defining feature of markets? Welcome to The Bid, where we break down what's happening in the markets and explore the forces changing the economy and finance. I'm Oscar Pulido.
Today, I'm joined once again by Jean Boivin, head of the BlackRock Investment Institute, to discuss BlackRock's 2026 midyear global outlook. We'll explore why scarcity has become the defining investment theme, what the institute calls the six big macro calls investors are making today, and how portfolios may need to evolve in a world where the future could unfold in dramatically different ways
Jean, thank you so much for joining us on The Bid.
Jean Boivin: It's great to be here.
Oscar Pulido: Well, Jean, you and I speak about every six months to talk about the BlackRock Investment Institute and the outlook for the markets. And six months doesn't feel like a long time, but these days it feels like a lot happens in the markets.
Recently you brought together the investment community of BlackRock to talk about the midyear outlook, and the theme of this outlook is scarcity versus abundance. What does that phrase capture, and why did it become the central theme of this outlook?
Jean Boivin: There are two main reasons, I think, that, makes that theme work for us. The first one is we've been talking for the last few years about a world shaped by supply. We thought we had entered a new regime very different from the decades prior to 2021 that was really characterized by limitation on the supply side. So that's what the scarcity, aspect of the title is getting at, and we think that the scarcity thematic is getting even more real. AI is creating, additional scarcity. It's putting pressure on resources, on the labor market, on physical inputs, chips, and so on. So, the scarcity aspect is an evolution of the world shaped by supply.
But the contrast with abundance is it comes from another feature of this environment, which is that there are these widely, different competing narratives that are playing out at the same time. And so, we tend to believe that scarcity is the story of the day, but at the same time, there's a strong abundance narrative out there about how AI is going to create all of this abundance that is already being ma- felt and materialized. We're going to maybe see a breakout from 2% growth in the US.
We're going to see disease being, eradicated according to some. And so, you see in parallel like a real scarcity at the same time as we talk about potentially solving all of the scarcity problem and being in a world of abundance. And we think that reflects another feature of this environment, which is that we are facing big calls. Big calls that are very different from each other and yet they cannot really be avoided. So that's the scarcity versus abundance frame.
Oscar Pulido: And Jean, before we go to those big macro calls, you mentioned 2% growth in the US when you were talking about the abundance part of the narrative. That 2% growth is not necessarily just a recent number. I think that's a long-term historical number. Maybe you can talk a little bit more about the significance of that number and the impact that AI could have on that number.
Jean Boivin: So, what is really remarkable is again that we are talking about the possibility of abundance. And what that means is for the last 150 years we have been in a world, the US was at the frontier, and that frontier has been growing at 2% per year. All the ingenuity of the 140- 50 years, that's about the Industrial Revolution, electricity, the internet, all of this has only been enough to keep us on that 2% trend. But now we talk about, forecasts where we could break out from two. The median from what is being currently being discussed is 3.5 percent trend growth. 3.5 might sound like a still a reasonable number, that's a massive increase from the 2% world. If we were really accelerating to 3.5%, it would be a world of abundance compared to what we have been. But it hasn't happened for 150 years. No, no innovation so far has ever managed to do that. Right now, we're in scarcity, but if AI does lead to, an acceleration and a breakout, that would be a massive game changer.
The last point I would make is if you just look at history, you say it's not likely to happen. However, AI might be the thing, for the first time making that conceivable. And the key thing is whether AI, leads to not only innovation but an acceleration of innovation. That's really the key thing that AI could do through the self-learning aspect and improvement that AI comes with. And if that does materialize, you can conceive now maybe some acceleration and now abundance being, maybe something that you can take seriously.
Oscar Pulido: So that breakout in growth hasn't happened yet, but it's something to monitor. And speaking of monitoring, let's go back to those macro calls that you mentioned, and the outlook talks about six big macro calls, things like AI-led growth, interest rates, geopolitics, US equity leadership and whether that will continue, there are a few others. Why is it important for investors to recognize these calls and how they might already be embedded in their portfolios?
Jean Boivin: Well, the reason why we make a big deal out of this is because it's unusual. there's always, calls to be made, whether the Fed's going to cut rates or not. Here we're talking about really big calls the first we talk about scarcity versus abundance. Dramatically, different world.
On AI, will AI be cheap going forward? will token price keep going down, and is it going to become more of a commodity? Or is AI going to get more expensive from here? We don't know that - that's a big call. It's going to determine how quickly AI is being used, whether it displaced labor or not. Another call is around the rate environment. it feels intuitive, and I think the most common narrative is that AI will lead to efficiencies that could lead to lower costs and low inflation, and maybe if that's true, then we have lower rates as a result. That seems intuitive and, it's pretty common. But it's far from obvious.
AI has the other feature which is it creates demand on resources. we're going through the fastest, biggest build-out. that's going to put pressure on resources, on energy, and you could see more competition for capital to finance this, and that would be putting pressure on rates to go up. Rates would be structurally higher.
So, you have these two competing narratives on rates that are both driven by AI. We don't know yet, big calls. We have, geopolitical choke points. We've just went through like a big illustration of that with the Middle East. Those have shown that we have vulnerabilities like the Strait of Hormuz, being a key choke point for supply chain.
It hasn't had the impact on market that you might have expected because throughout there's been hope that we were going to reopen the strait in fairly short order. There's more hope now that this is actually happening. But the alternative would have been a world where, it stays closed, and it's binary, and a world like this would have been the biggest supply shock in history. So again, another big call and then you can think also of US leadership, for markets. That has been a question in many global investors last year. Will the US retain its status as the leader in global markets to generate the return, earnings, and profits? That's a question that was on the table, but it's a big call. And so far, taking the other side of the US hasn't really worked out. It might over time, but it's a big call.
Oscar Pulido: Another concept that you introduce in the outlook is 'polyfurcation', and we're going to need a little help here understanding the true definition of this word. So, tell us, what does it mean, and why do you think it's a better way to think about markets today than simply talking about uncertainty?
Jean Boivin: Yeah. throughout my career, I think at every year in my career, there's been claims that we were facing the highest uncertainty we've ever faced, every year. What we are trying here to convey, though, is that the nature of the uncertainty that we're facing is completely different.
And we've already talked about these big calls, which is a step in the direction of what we're describing here. But it's really that, it's not like you have a central base case and around which there's a distribution and you're going to learn and you're going to adjust, it's we can go left or right. if it was only two options, we would have talked about bifurcation. But since we have more than two here, we went from bi to polyfurcated, to capture this idea. But it's really about binary or, or bifurcation, that is the true nature of this uncertainty, and that has massive implications on how you think about, portfolio or even policymaking.
In the industry, we've been used to think about building strategic asset allocation that was providing a long-term anchor to portfolio because you could articulate a base case in the long term and have some confidence on it. Right now, this is very hard to do, there's not such a base case. So, the uncertainty we really are facing is not so much a near-term dynamic. It's really about the long term, and it could go in very different directions. So that calls into question whether we should put more faith on long-term asset allocation than short term. We actually think that probably not, and we need to be all more tactical as a result. It calls into question policymakers. they cannot rely as much on the long-term forecast and think of it as being stable. That's something that now, the long term is probably the most important source of uncertainty that will then dictate what's happening in the short term.
So, polyfurcated really means, a different type of uncertainty that cannot be easily handled by having a base case with some uncertainty around it. You need to handle multiple scenarios always and keep track of them.
Oscar Pulido: Well, we have to use different words for this environment because it is a very different economic environment, and certainly AI continues to be at the front and center of these different scenarios that we keep talking about.
Of course, the conversation feels different when we talk about AI. We've moved on from whether this is real or not because I think we're seeing evidence that it's having an impact at the macroeconomic level and at the company level. Now, it seems like we're talking more about bottlenecks, infrastructure, and who captures the value in this AI transformation. How has your thinking on AI evolved over the last six months, and where do you see the biggest investment opportunities today?
Jean Boivin: So, when we last spoke about this AI, story six months ago, we were talking about the potential for AI to be the fastest build-out of CapEx in history and the largest.
Starting point here, I think, is that now six months after, that was already the framing, and now these intentions have been scaled up by 30%. So, taking a pause here and just absorbing what these numbers are. We were talking about five to eight trillion six months ago. These numbers have been scaled up by 30%, -three, zero.
So that tells you about how fast this is happening. So, people could have said six months ago Well, these are only aspiration and ambition. Who knows what's going to happen? we've seen that numbers being deployed that are faster, it's front-loaded, and we revise upward the entire trajectory by 30%.
So, it's happening. The build-out is real. we've also seen, more proof point that revenues can be generated on the back of AI. So, this year has seen very surprising result in terms of earnings and have created so a better handle on reconciling the spent and what we're building and with potential revenues coming. So, there's a bit more evidence to support that conjecture that we had six months ago.
Now, I think what is also becoming clearer in the last few months, I've made that clear, is that we are going to see, very significant disruption. We don't know quite where they're going to be.
We've seen, software being the place where markets have been providing attention recently. But the reality is we know there's going to be quite a bit of disruptions. We don't quite know where it is going to be, and there's going to be a lot of debate. I think the disruption and the disruptee, like the losers, will become clear before we get clarity on the winners.
And so, one of the things that leads you in terms of investment is trying to find ways to get exposure to AI without having to pick the winners. and if you can do that's pretty attractive. So, participating in the build-out, like through infrastructure is one way to do that. You don't know who's going to be using that infrastructure five years down the road. Maybe it's not those that are currently building it, but there's going to be a use for that infrastructure because AI will be a, a real thing. So rather than picking the winners, you can, participate in the build-out in a way that is a bit more neutral. That's an example of the evolution, of, of the AI theme.
I think this, the fact that we're going to see more disruption and we're going to see winners and losers also means, and that's a strong belief we have, that this is an environment that's going to create more opportunity for Alpha. Those that have early insights on who might be winning or have the right framing on what's going to determine that will probably be able to generate outsized return more so in this environment at any point in the last few decades. So, it's an AI story that is broadening. it's not a market that is broadening beyond AI, but it's, an AI story that is broadening,
You can be totally bullish on AI that doesn't necessarily equate to being bullish on the S&P 500. AI can be so real that it disrupts the current kind of incumbents. And so, on the way to AI winning, you might see some disruption and it's not going to be simply as just being, overweight US equities all the time throughout this AI build-out.
Oscar Pulido: So, since we're talking about portfolios, and you're starting to talk a little bit about asset classes and winners and losers, one of the things that the outlook argues is that traditional portfolio construction may no longer work as well as it once did, and that investors need to think beyond the traditional asset class label. So, what do you mean by that, and how should investors be rethinking diversification in today's environment?
Jean Boivin: So, the, the environment that I've described that we put a name on, - polyfurcated - where you have mega forces that are shaping the structural transformation. We've been living in that world for a few years now, and I think we've seen as a result that the traditional approach to portfolio construction has been challenged.
Diversification that we would have expected from asset classes, bonds versus equity, has not played out. And I think that has led, as a result, clients to reconsider. And that has been, basically put under the label of total portfolio approach. The alternative that clients are trying to look through and trying to define, as a name, Total Portfolio Approach. What they actually mean by that is not clear, but it's a catch-all for, anything that would be different from the traditional approach.
And I think the core feature we see there, is if we expect, asset classes to behave the way that they have historically, it's unlikely to go back or to happen as long as we think that we're in a world shaped by mega forces.
And instead, we might want to think about diversification, not at the asset class level, but at the level below that. Think about AI, AI is a theme. There are different ways to play the theme. You can think about the credit component to it. You can think about different aspect of the capital stack. You can think about different companies playing in different parts of the AI, and that's a way to build a diversified exposure, that you won't be able to get by just thinking about assets, or bonds versus equity.
So, we think the new way of thinking is to try to move beyond labels. One is a theme of our outlook, by that we mean the asset class labels. And think about opportunities that are more thematic, or related to mega forces, and think about diversification at that level, rather than just hoping it from the at the asset class. So that's a general direction for rethinking portfolios.
And I mentioned infrastructure before, but I think infrastructure is a poster child right now of that broader thinking. If you want to think of infrastructure as an asset class, which we tried to, we had a paper last year to try to do that, you're contorting yourself into trying to define something that is not really an asset class. Infrastructure is building like physical things - data centers, ports, and things like that, real asset in some ways. And if you go with an asset class mentality, you're going to start to put it in the public or private buckets, and then within that, you're going to think about how much I subdivide that in terms of infrastructure. And you're going to end up, allocating a fairly small amount to infrastructure if you go with the traditional, asset class breakdown. But instead, if you think about the economic return drivers that know, AI is or that the energy transition implies and so on, and you think about how much of infrastructure has to play there, you're going to get to an allocation to infrastructure that's going to be quite a bit higher than, an asset class lens.
And we think that's closer to the truth of what will be the right allocation. So that's a poster child of trying to unshackle ourselves from the asset class frame and, think a bit more broadly about how you actually get the exposure.
Oscar Pulido: Jean, we started with the theme of the outlook being scarcity versus abundance, and it sounds like scarcity is the, near term reality of the world, but abundance is maybe the longer-term opportunity. If that is the case, what should investors be doing over the next six to 12 months while that story plays out?
Jean Boivin: So, first thing I would say is, there's going to be a lot of talk about AI bubble, and people will point to valuations, and we should track this. It boils down to, whether you think the earnings potential, is durable.
For now, we think this is too early to throw the towel on this and conclude that this is a bubble, so we would advocate maintaining exposure to the AI public market equity themes, and that's why we have still an overweight US equities given that this is where it's playing out, most predominantly.
Now, another key theme is income, we think we're in a world of scarcity, which will maintain rates relatively elevated. Not that they're going to go up necessarily dramatically, but we don't think they're going to come down much. So that income is durable, and that's going to be attractive. And in Europe in particular, we think that's even more attractive on a regional basis given how far the markets have been expecting hikes to happen there. So durable income is an interesting place to be.
We also think that we need to think beyond asset class more generally. as I mentioned, infrastructure is one example of this. we think alpha has more potential in this environment. And at the end of the day, you cannot avoid making big calls. As I said, we're going to be exposed one way or the other. But if you don't know, or don't have any conviction, the place to fall back is on the widest kind of exposure to the universe, of investment possibilities. So, not just one market and one region, but to get as broad exposure as possible to the cap weight index of this universe. So, these are the way to play the practically, I think, the, this environment. But AI is clearly at the center and will determine those returns.
Oscar Pulido: Perhaps the other thing to do over the next six to twelve months is to continue to follow what the BlackRock Investment Institute is saying and follow how the world is evolving and maybe some of those more dynamic and adaptive shifts that you have to make in portfolios.
Jean, I mentioned we only speak, about once every six months, and it's not really that long of a period of time, but it seems like this day and age, a lot of stuff is happening. So, thanks for being with us today to do a bit of a mark to market of where we are in terms of markets and the economy, and thanks for doing it here on the bid.
Jean Boivin: Thank you so much. It was a pleasure.
Oscar Pulido: thanks for listening to this episode of The Bid. We'll be taking a bit of a break over the summer but still bringing you new content every other week until we go back to our regularly weekly scheduling in September. Up next, we'll stay on the theme of geopolitical fragmentation and look at one area where those forces are already reshaping markets: defense investing. Make sure you subscribe to The Bid, so you don't miss the episode
<<SPOKEN DISCLOSURES>>
This content is for informational purposes only and is not an offer or a solicitation. Reliance upon information in this material is at the sole discretion of the listener. Reference to the names of each company mentioned is merely for explaining the investment strategy and should not be construed as investment advice or recommendation. For full disclosures, visit blackrock.com/corporate/compliance/bid-disclosures
MKTG0726-5700182-EXP0727
Asia is gaining attention in global portfolios as its economic scale and market structure evolve. Oscar Pulido speaks with Aarti Angara, Head of Global Product Solutions for Asia Pacific at BlackRock, about opportunities across equities and fixed income and how investors are approaching the region.
242. 2026 Outlook: Pushing Limits
Web title: 2026 Outlook: Pushing Limits
Episode Description:
AI-driven investment, rising leverage and shifting market dynamics are reshaping the 2026 stock market outlook. As companies accelerate spending on data centers, chips and digital infrastructure, micro-level decisions are increasingly influencing the capital markets and broader economy.
In this episode of The Bid, host Oscar Pulido speaks with Jean Boivin, Head of the BlackRock Investment Institute, about the major forces shaping the 2026 markets and investing landscape. Jean breaks down how AI-related capital expenditure is transforming growth patterns, why governments and companies may need to leverage up to finance large-scale projects, and how these trends interact with today’s policy and market environment.
They also explore the diversification mirage — the idea that in an economy driven by a few powerful megaforces, some strategies that appear diversified may actually be concentrated calls. Jean shares how this affects views on regional equity markets, fixed income trends and the evolving structure of global investing.
Key insights include:
How AI and digital infrastructure investment are influencing the 2026 market outlook
Why rising leverage may shape the behavior of governments and companies
The expanding role of private credit in today’s capital markets
How megaforces complicate traditional diversification in global portfolios
Where BII sees structural opportunities across Japan, Europe and emerging markets
2026 market outlook, AI investing, AI Buildout, AI infrastructure, Capital markets, Megaforces, Stock market trends, Private credit, Global macro outlook, diversification strategies
Sources: BlackRock Investment Institute 2026 Global Outlook
Written Disclosures In Episode Description:
This content is for informational purposes only and is not an offer or a solicitation. Reliance upon information in this material is at the sole discretion of the listener. Reference to any company or investment strategy mentioned is for illustrative purposes only and not investment advice. For full disclosures, visit blackrock.com/corporate/compliance/bid-disclosures.
<<TRANSCRIPT>>
Oscar Pulido: 2025 was the year AI leapt from boardroom talking points to real world line items, and in 2026, that momentum only looks set to accelerate.
Jean Boivin: The scale of the Capex, we're talking about a range from $5-8 tn by 2030. That would make it the fastest capital build out ever. Not recent memory – ever!
Oscar Pulido: Companies are pouring record levels of capital into the infrastructure that will power this technology. Governments are reevaluating policy through the lens of productivity gains and competitive positioning, and markets are shifting as the ripple effects of AI spread through every corner of the economy.
Jean Boivin: The scale is so big that it is already driving the macro. And why? Because AI has been dominating everything else.
Oscar Pulido: But beneath the headlines lies a deeper story. How this massive AI build out intersects with corporate balance sheets, why traditional diversification may be losing some of its punch, and how investors can navigate a world where micro-dynamics are increasingly the macro picture.
Welcome to The Bid where we break down what's happening in the markets and explore the forces changing the economy and finance. I'm Oscar Pulido.
Today I'm pleased to welcome back Jean Boivin, head of the BlackRock Investment Institute to help us unpack the 2026 global outlook. We'll dig into the three big themes shaping BII’s view for the year ahead, and how other mega forces are set to evolve in 2026, and where he sees opportunities developing across markets outside of AI, like emerging economies, Japan and Europe.
Jean, thank you so much for joining us on The Bid.
Jean Boivin: It's great to be here.
Oscar Pulido: Well, believe it or not, the last time we had you on, we were talking about the outlook for 2025, and now we're talking about the outlook for 2026. I know the BlackRock Investment Institute has recently met with, all the investors from around BlackRock and got together to talk about the themes for next year. And in fact, there are three themes that the BII is talking about. What are those three themes that we should know?
Jean Boivin: So, it's great to be here, and let’s just put that a little bit into context. We've been talking for the last few years, and we'll talk more today about the fact that we're in an era of transformation, something we haven't been through for a very long time – decades - shaped by mega forces. But that has been creating an environment that has a couple of core features. Markets are driven by a very few forces at play, which makes them concentrated and leads to an environment where it's very difficult to avoid making big calls and there's no real place to hide or to be neutral.
Going into this year, that story's evolving, and we have three themes. The first one is that micro is macro. The sheer scale of what we're talking about in terms of AI build out is making this decision, having macro implications. The second is leveraging up. So, there's no way we can go on this transformation without having more debt and leveraging up. And that's going to have implication about investment opportunities. And the third theme is around the possibility of diversification mirage, the fact that we might be lured to diversification in some aspect where it's not really real, so things to unpack, but these are the three themes.
Oscar Pulido: And you mentioned mega forces, this is now a term that has been with us for a couple of years, and the BlackRock Investment Institute pioneered the thought of these big structural changes that are going on in the global economy that are going to have a big impact on markets and returns. While there were several mega forces that were talked about, it seems like a big focus of the 2026 outlook is centered on the mega force of artificial intelligence, AI. So, why is that? Why is it such a big focus for the outlook for the next year?
Jean Boivin: So, we had five mega forces. Mega means they're big, but it turns out that even within those mega forces, there's one that is dominating quite a bit now. And that's AI, as you say. Why is that? The scale of the CapEx, deployment that is already started and is running faster than we were expecting last year, and our outlook last year was putting out there pretty ambitious number. We went through them already, for the first year. The scale is so big that it is already driving the macro.
So, we look at growth in the US in 2025, and we got three times the contribution of non-recession investment than typically is the case. So that's all AI. We were sitting at this time last year, and we were debating about policy uncertainty that could lead to depressed investment- that was a consensus view back then. And yet, 2025 has been the massive investment boom. And why? Because AI has been dominating everything else, all the traditional macro aspects. So, the reason why this is so central to our theme is that it's driving everything. And in the outlook, you'll see, even though we have many topics we cover, on each of these topics, AI finds a way to bubble up.
Oscar Pulido: There are definitely a lot of mentions of AI as you read through the outlook and you talk about CapEx or capital expenditures that are sizable in amount. Remind us of what some of those numbers are. What have they been, what do you think they're going to be next year and what are the projections of the next couple years?
Jean Boivin: So, we are looking at, a range from $5-8tn by 2030. Again, this is ambition, it's not realized yet. If that happens, if we do get to these numbers by 2030, that would make it the fastest capital build-out ever. Not recent memory - ever. So, we're talking about something that is totally unprecedented,
Oscar Pulido: So, you mentioned the $5-8 trillion in terms of CapEx build-out by 2030. I think there's a question though that most people are asking and that even the markets were asking at that very end of 2025, particularly in November, we started to see a little bit of a pullback in AI stocks. They've done well over the course of the year, but they had a bit of a pause, and I think the reason is people are wondering, is AI in a bubble? How do you think about it when people ask that question?
Jean Boivin: Well, the first thing I'd say is, I don't think this is the right frame or the most useful frame for investors. Maybe we are in a bubble. Even when we are in a bubble, it takes a long time to know we're in one. And it's really only in hindsight that it's clear. But moreover, the reason why we're talking about this now is because we're talking about unprecedented numbers. So, these numbers I've just thrown out a minute ago are huge, and admittedly, you jump to, maybe it's too much, and maybe we're talking about bubble. But the potential for revenues that AI will generate, the potential transformative, implications of AI is also unprecedented. So, you need to look at both sides of the ledger, if you will, to make an assessment. And so rather than thinking about bubble, we think this is really about is we have a clashing of orders of magnitude that are going on right now. And it's about trying to reconcile them and see whether they can add up. We think this is the frame that we need to carry now in the next few years is keep reassessing whether the spending we see, maps or not with the potential revenues.
The bottom line is that you can see how at the macro level these numbers of spending, could justify themselves. You could see that happening, first by the tech existing business revenue line expanding, and I think there's room for that to happen but eventually it's going to be about AI leading to new pools of revenue in many parts of the economy. It should be transforming everything we do. And once you start to put some numbers on this, you can see that at a macro level, eventually, it could add up.
There are two conditions for that to happen and the first is we're going to need to see a breakout of growth from 2%. And I want to pause here because that's a big deal. But the reality is, if you look at the last 150 years in the US, the US has been at the frontier of innovation. and all of the innovation we've seen in the US, think of industrial revolution, electricity, internet, medical breakthroughs, all of this human ingenuity has just been enough to keep us on this 2% trend. We never broke out of it. So, saying that now we're going to be breaking out of it is a big statement to make. So, I don't think we should take that casually. However, we do think it's conceivable for the first time. because AI is something that is very special. The potential here is to accelerate the pace of innovation, so AI will help us innovate. And if that's the case, you could see how that can lead to, a faster breakthrough in science, and this is how you could get acceleration of innovation that leads to a breakout from 2%. So not a given, we'll need to track it, but for the first time, I think you can tell a conceivable story for why would happen. So that's the first piece.
Oscar Pulido: - you mentioned the 2% figure, and I just want to be clear, that's GDP growth in the US for the last 150 years has trended around 2%. And what you're saying is that the AI revolution, the AI megaforce, could cause that number to accelerate?
Jean Boivin: That’s exactly right. But the second part that needs to happen, is the fact that even if in the macro level we do generate all these revenues, it's not clear who's going to be able to extract or capture these revenues yet. So, now the tech industry will be able to capture some for some time but as it gets embedded in everything, it's going to be across sectors and it's going to be about competition for revenues across sectors. Who wins is unclear and that's why it's going to become a real alpha active story. So at the end of the day, we are bullish on, on AI still because even though these ambitions are big, we're just starting. And we're about an eight to a fifth of the scale eventually. We don't think that these companies or the build out will be on the autopilot. So as things play out and ambitions will be revised. And we'll need to track this, but it's way too soon in our view to, conclude that it's overdone. So, we're bullish on AI, which leads us to be bullish on risk more broadly, and that's how we go into 2026.
Oscar Pulido: Right, at its core, the concern about a bubble is that there's a lot of money being spent and will it generate a return on investment, particularly for the companies that are outlaying these big capital expenditures. And perhaps that's why you're saying the micro impacts, the macro. That's the first theme of the 2026 outlook.
So, let's talk about the second theme, which, you mentioned is leveraging up, which actually is also related to AI and talks about this observation that big tech firms, essentially these companies that are spending on capital expenditures towards ai, are starting to issue debt as a way to finance these big capital expenditures. Talk about why is that important and what is the implication for all this corporate debt being issued in an economy?
Jean Boivin: So, we think this is something that is profoundly changing the nature of the market environment. We're talking about a phenomenon where we are spending investing and building before we get the benefit and the revenues that will come down the road. So, there's a gap in timing between when you need to spend and the revenue will come by nature implies that we're going to have to bridge that. And the way to bridge that is to get more in debt or to lever up leveraging up. so that's what the real heart of it is this financing hump - and it's not good or bad. It's like, you buy a house, you don't have all the revenues immediately that will justify your investment, but over time you'll get it. And the only way to do it is to leverage up personally. so that's exactly the same analogy here. We're going to have to go through this phase, neither good or bad. And that's in the context where government balance sheets are already, leveraged up quite a bit. The system will be probably more sensitive to shocks that's going to come as a result. It's going to be a feature of this environment; we'll need to navigate that. It also means that because of the interplay between the government debt and now the leveraging up of the private sector, big moves in government debt yields, big moves in interest rate, could create more disruptions in the private sector as they leverage up.
So, that's the nature of where we're going. But it's important also to realize that we are starting from a corporate debt side that is extremely healthy, very healthy. So, it's not a red flag, again, it's not good or bad. I think there's room to move in that direction. But that also means a different kind of sensitivity of the markets which investor will need to be taking into account.
In terms of investment opportunities, this theme means that, we're going to be tapping more heavily in the source of financing as we leverage up, and the government will not be there to finance those as it might have been in another transformations. As a result, these diversification of sources of investment in financing, I think will be a structural tailwind that will continue to expand the role of private credit as a source of funding for these projects. And for investors as a result creates, ongoing opportunities. So that's one of the key theme implications. And then the other would be around government debt, in a leverage up environment. we are going to see, I think, pressure on yields to continue to go up. And this AI theme's going to be, over the medium term, inflationary. So that leads us to be a bit more careful on long-term yields and underweight long-term, US treasuries in particular.
Oscar Pulido: We've talked about equity markets and now we've talked about fixed income markets, and the commonality has been that it's AI related, right? We're talking about how the build out of AI impacts both asset classes, which makes me think when AI is such an encompassing theme in markets, at some point you do want to think about diversification and where do you think about diversification in this sort of market regime that we're in now?
Jean Boivin: Yeah, so that's our diversification, mirage theme here. And the point is that it's going to be, it is very difficult to find diversification because it's the nature of this environment that transformation, a couple of mega forces that are driving these markets. And, as I said, like you, you're either with or without, or not with, the, these force or you're with ai or you're not convinced and you're not, but you can't really be in a halfway house, or neutral.
So that's makes diversification very difficult, and it also creates this lure. It might be appealing. You might think you're doing diversification, but what really it is it's an active call against AI. It might be the right call, but if you do it, it should be with conviction. So, this is the mirage, right? So, there's something that is an active call but is being positioned as being something of a diversification.
Same thing and we've seen earlier this year around the fact that US policy uncertainty was creating some concern by global investors and they, there was an argument to say, well, maybe we should diversify away from the US have more in Europe and so on, might be the right thing to do, but that's not diversification. It's an active call. Taking a stance on what in the US versus the Europe. So, point is a lot of what used to be seen as diversification properly in the past might not be true diversification in this environment.
Instead, I think, we need to think about more creatively about diversification. So instead, we think there are strategies like market neutral strategies that are really like trying to be insulated from the broad market movements and try to generate alpha around this. It's not the traditional diversification, where you want to think about allocating in this environment, not to be fully exposed to the broad market movement. Another aspect is thematic that are likely to work in multiple scenarios. So, we think infrastructure is something that works across many of the mega forces and across many ways in which they might pan out. So, a thematic like this is probably more diversified in the sense that it works across more, portfolios.
And finally, this is stretching the idea of diversification, but fundamentally it's a world where we won't be able to diversify as much as we used to. We need to get on with the program and one real way to manage this is going to have to require to be thinking about more plan B and be ready to pivot. So that's not typical diversification, but that's an implication of this environment where with less diverse passive diversifier, we're going to need to more actively pivot and think about a plan B if the AI story becomes more challenge, for instance.
Oscar Pulido: And Jean let me come back to another theme that you talked about earlier. You were mentioning private credit and how tech companies are tapping the capital markets in order to fund their capital spending, and private credit is one of those ways. I actually think about one of the five mega forces while we've been talking about AI is the future of finance and that is private credit, but I think it also includes a few other themes within it that might play out in 2026? Maybe talk a little bit about what your views are there.
Jean Boivin: So, I think, beyond the private credit aspect in the future of finance, we're thinking about the reshaping of the financial architecture that is driven by financial innovation, digital financial innovation. And you can think about tokenization as a big part of it. The crypto landscape and clearly like stable coins is at is the core of this. It's been a big story in 2025. It's in its infancy in many ways. but it's on a very steep adoption curve, the adoption is widening, and now we're seeing that being integrated in mainstream payment system. This has been accelerated by policy and regulation in the US this year and we expect that to continue to broaden. We're going to see broadening of the access to the dollar, as a result of international adoption of stablecoin that are backed by US dollar assets.
And that is the beginning. We think there's going to be questions around how the financial system reorganized with itself around this. And that is still to be determined. 'cause these will make payment more accessible globally, but they will also mean that you can maybe store your savings, short term in a stable coin or have a portfolio between your bank account and your portfolio. So, there's going to be a competition that will appear with this. Banks might be starting to issue their own stable coin, so that's a pretty energetic space that is building out right now. Big theme. It's in its infancy, but with a lot of potential. It's not necessarily an investment story in stablecoin, but it's thinking about how does it shake up the financial system? And as a result, maybe, for instance, we think in European financials, all this digitalization in AI creates additional expected return for the sector. So, that's going to be about tracing out these impacts across asset class.
Oscar Pulido: That's definitely a new component to the global outlook that we haven't talked about in years past but speaks to why these are real structural changes that are going on in the economy.
Jean, we talked about micro is now macro, talked about leveraging up, we talked about diversification and the mirage of diversification. What are some other themes that investors should be considering over the next six to 12 months that maybe we haven't talked about thus far?
Jean Boivin: Yeah, so we talked about like, well, I think a lot about AI. But if you look more broadly, there's more, right? Japan, equities continue to be attractive to us. it's been a story over the last couple of years, we see that continuing. There's, corporate reforms still, having momentum. We're seeing growth catch up. And ultimately, even though the BOJ needs a continuing attention, might be sounding hawkish like they do, or they've done the recent past. Ultimately, I don't think inflation is a real problem in Japan. And so, we're going to see more fiscal support inflation that is benign. So, a pretty constructive environment. So, Japan, we like.
Europe is – and we need to make a nuance here that is actually very important - in terms of broad market exposure, we prefer the US but and we put out a paper recently on Europe and the investment renaissance that Europe might be eventually embarking on. Right now, it's more selective, so we see like sector, like finance, as I mentioned, healthcare, defense. These are pockets where we think there is, being overweight allocation makes sense. And great opportunities for investors already now. And then there's the potential as Europe builds out, more of the defense side. We see more fiscal support coming and if we move towards signs of greater capital market deepening, which is really the big thing there. If it were to happen, would be a game changer and would turn this selective story into a broader story. So, this is not yet on the table, but it's something to watch and could become more real over the course of 2026.
In EM, this is a story of 2025, we had massive return in EM in 2025, made possible by a weakening US dollar, clearly part of it this year. We continue to see, a stable dollar or mostly neutral but constructive for EM. Yields in the US that are still fairly low and as a result, help to a favorable backdrop to EM and their fiscal position overall is productive. So, EM is attractive, but we see that more on the hard currency debt side. So, these will be like the three kind of other areas I would mention, on top of everything else we talked about.
Oscar Pulido: Jean, we mentioned we haven't seen you since last year when you talked about the 2025 outlook, but we’ve spent a lot of time with your colleagues at the BlackRock Investment Institute who have guided us through geopolitical events, through the tariffs that were announced back in April, through some of the macro events that have happened throughout the course of the year. And then great to have you back as we look ahead to 2026. Thank you for giving us that guidance and thank you for doing it here on The Bid.
Jean Boivin: Thanks, Oscar. It's a pleasure to be here.
Oscar Pulido: Thanks for listening to this episode of The Bid. Over the holidays, we will be taking a break from our regularly scheduled weekly episodes, but we'll be dropping in a couple of episodes of Market Take, our weekly short form series from the BlackRock Investment Institute. We'll be back in January with brand new episodes. But from all of us here at The Bid, have a great holiday season.
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The 2026 market outlook is shaped by AI, record capital expenditure and rising leverage. Jean Boivin of the BlackRock Investment Institute joins The Bid to unpack why “micro is macro,” how AI investing and megaforces are driving growth, what leveraging up means for debt markets, and why diversification may be a mirage.
Glenn Purves, Global Head of Macro at the BlackRock Investment Institute, will help us explore why the long-term economic outlook has become less predictable, how investors can handle rapidly moving headlines and how mega forces, like AI and geopolitical fragmentation, are reshaping economies.
Jean Boivin, Head of The BlackRock Investment Institute, joins Oscar to provide insights into the structural shifts we anticipate in 2025 and explain how investors can navigate the five mega forces that the BlackRock Investment Institute identifies as key drivers of the new macro regime.
Need to learn more before you make investment decisions? Visit our insights hub to read more from BlackRock’s thought leaders' perspectives on investment strategies, artificial intelligence, retirement, and other market topics.
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