Asset Managers Stay Bullish and Keep Loading Up on Stocks

There comes a point in every market cycle when taking profits makes sense but for global asset managers who’ve enjoyed three straight years of double-digit equity returns, that moment hasn’t arrived yet.

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“Our outlook of steady economic growth and a friendlier monetary and fiscal backdrop supports a risk-on stance in our multi-asset portfolios. We’re staying overweight equities and credit,” said Sylvia Sheng, global multi-asset strategist at JPMorgan Asset Management.

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“We’re leaning into the strong trends driving markets and remain optimistic through the end of next year,” added David Bianco, Americas CIO at DWS. “At this stage, we aren’t playing the contrarian card.”

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Nannette Hechler-Fayd’herbe, EMEA CIO at Lombard Odier, voiced a similar view. “Begin the year with meaningful equity exposure if anything, lean slightly overweight, especially in emerging markets. We don’t see a recession materializing in 2026.”

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Their comments come from News interviews with 39 investment managers across the US, Europe, and Asia, representing firms such as BlackRock, Allianz Global Investors, Goldman Sachs, and Franklin Templeton.

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More than three-quarters of participants are positioning portfolios for a risk-on environment through 2026. The bullish thesis hinges on resilient global growth, accelerating advances in artificial intelligence, supportive central banks, and ongoing fiscal spending all expected to fuel above-average returns across global equity markets.

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That confidence does carry risks, including how widespread the optimism has become. The broad consensus among institutional allocators also mirrors what sell-side strategists around the world are projecting.

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If the upbeat forecasts prove accurate, investors could be in for a remarkable fourth consecutive year of outsized gains in the MSCI All-Country World Index. That would extend a rally that has already generated $42 trillion in market value since late 2022 the largest wealth creation surge ever seen in global equities.

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Even so, the optimism isn’t without fundamental justification. The AI boom has already added trillions in value to companies tied to the sector, and despite the hype, the technology remains in the early stages of adoption just three years after ChatGPT ignited mainstream interest.

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Most buy-side managers rejected the idea that AI has become a runaway bubble. While several noted speculative pockets among unprofitable tech names, 85% said valuations for the Magnificent Seven and other AI leaders remain grounded in strong fundamentals. They argue the trade is supported by earnings, marking the start of a new industrial era.

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“You can’t call it a bubble when tech keeps delivering massive earnings beats. In fact, sector earnings have outpaced the rest of the US market,” said Anwiti Bahuguna, global co-CIO at Northern Trust Asset Management. Given that backdrop, investors expect the US to remain the core engine of the rally.

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“American exceptionalism is far from over,” said Jose Rasco, CIO at HSBC Americas. “As AI adoption accelerates globally, the US will remain a central player.”

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Still, many investors echoing sentiments from Helen Jewell, international CIO of fundamental equities at BlackRock see compelling opportunities abroad. “The US is home to the high-growth, high-return companies, and that’s undeniable. But valuations already reflect that, and investors may find more attractive upside internationally.”

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Corporate profitability remains the north star for equity investors, and rising government spending from Europe to Asia is fueling expectations for stronger earnings.

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“We’re seeing a meaningful broadening of earnings momentum across market caps and across regions including Japan, Taiwan, and South Korea,” said Wellington Management strategist Andrew Heiskell. “Heading into 2026, we see clear potential for a European earnings rebound and broader emerging-market strength.”

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India stands out as a top opportunity for next year, according to Alexandra Wilson-Elizondo, global co-head and co-CIO of multi-asset solutions at Goldman Sachs Asset Management. “India has the potential to become 2026’s Korea-style re-rating story shifting from a tactical trade to a strategic anchor in global portfolios.”

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AllianceBernstein’s head of equities, Nelson Yu, sees enough progress outside the US to justify reinvestment. He points to Japan’s governance reforms, Europe’s renewed capital discipline, and improving profitability across select emerging markets.

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At the sector level, investors are searching for indirect AI beneficiaries, especially among clean-energy providers positioned to meet rising power demand. Smaller companies are also attracting renewed interest.

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“The earnings picture has improved for small caps, industrials, and financials,” said Stephen Dover, chief market strategist at Franklin Templeton. “Small caps and industrials tend to be more leveraged, so they should see profits rise as the Fed lowers rates and borrowing costs decline.”

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Francisco Simón at Santander Asset Management expects US small-cap earnings growth to exceed 20% after years of lagging performance. Reflecting this momentum, the Russell 2000 recently set a new all-time high.

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Healthcare has also emerged as a favored contrarian play. Many managers say low valuations and solid fundamentals position the sector for meaningful upside.

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“Healthcare could surprise to the upside in US markets,” said Jim Caron, CIO of cross-asset solutions at Morgan Stanley Investment Management. “With a midterm election year ahead, policy could become more supportive. Valuations remain attractive with significant room to catch up.”

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Still, no allocator is heading into 2026 without reservations. The biggest concern is a resurgence of US inflation. If rising prices force the Fed to halt or reverse its easing cycle, markets could face sharp volatility.

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“A scenario where US inflation rebounds in 2026 though not our base case would hit multi-asset portfolios hard by hurting both stocks and bonds,” warned Amélie Derambure, senior multi-asset portfolio manager at Amundi. “Investors will need the Fed firmly on their side next year.”

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Another source of anxiety: President Donald Trump’s unpredictability on trade. Any escalation in tariff disputes that rekindles inflation would weigh on risk assets.

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Oil and gas producers also remain out of favor, unless geopolitical turmoil forces supply disruptions. While such events could boost those sectors, the broader impact on risk assets would likely be negative.

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“Any geopolitical shock affecting oil prices will have outsized implications for financial markets,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute. “Clearly, both the Middle East and the Russia-Ukraine conflicts have the potential to move energy markets significantly.”

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