Pushing limits

The world’s economies and markets are being transformed by mega forces, especially artificial intelligence. As we track this transformation into 2026, the three investment themes in our 2026 outlook are: one, Micro is macro; two, Leveraging up; and three, Diversification mirage.

First: Micro is macro. Companies’ capital spending ambitions tied to the AI buildout are huge - big enough to have a macroeconomic impact.* The overall revenues that AI eventually generates could justify the spend at a macro level, but it’s unclear how much tech companies will capture. We think they’ll adjust plans as visibility on potential revenues and energy constraints improve.

Second: Leveraging up. AI spending comes first, benefits and revenues are likely to only come later. That creates a need for long-term financing – making greater leverage inevitable. We expect companies to keep tapping public and private credit markets, creating opportunities for investors.

Third: Diversification mirage. In markets driven by just a few forces, allocations made under the guise of diversification may now in fact be big active bets. Investors should be ready to pivot quickly. We think traditional diversifiers like long-term Treasuries will no longer be the reliable buffer they once were. We prefer exposures with their own sources of returns, such as private markets and hedge funds.

The bottom line is: we stay pro-risk and think the AI theme will remain a key driver of equity returns. We see an environment ripe for active investing.