Link
Today, Sebastian Paris Horvitz, Head of Research at LBP AM, shares his outlook for 2026 against a backdrop of resilient economic growth, moderate inflation, and more accommodative monetary policies.
Discover the opportunities to seize in 2026 in this new “Market Views” video.
The year 2025 opened amid deep concerns for the global economy, fueled by announcements of new U.S. protectionist measures.
Although these policies were indeed implemented, and despite a historic increase in U.S. customs duties, the resulting shock proved less damaging than expected.
As a result, global economic growth turned out to be far more resilient. It was supported by continued monetary easing and the announcement of stimulus packages, notably in Germany and the United States. In addition, massive investments in artificial intelligence across the Atlantic further boosted growth.
In this environment, financial markets delivered very strong performances, with many equity indices around the world approaching or exceeding 20%
2026 should continue to benefit from the supporting factors that underpinned last year’s market optimism, despite the turbulence caused by geopolitical tensions triggered by certain decisions taken by U.S. authorities.
From an economic policy standpoint, there will be significant sources of support:
In 2026, we should even see a few additional policy rate cuts, albeit limited, except in Japan where hikes are expected to continue.
In this context, we believe early 2026 should remain supportive for markets and favorable to risk-taking, even though valuations for certain assets have become somewhat demanding.
We maintain a relatively defensive position on sovereign bonds and believe it is prudent to underweight them in a diversified portfolio. This is partly due to the potential pressure on the market stemming from the growing financing needs associated with ongoing stimulus programs.
For European corporate bonds, we maintain a neutral stance, largely because spreads remain very tight. As such, we keep a quality bias and therefore a slight preference for investment-grade over high yield*. We also maintain a solid exposure to the banking sector. To capture the carry offered by high yield*, selectivity remains essential.
Convertible bonds remain highly attractive and increasingly offer privileged access to corporate financing in the field of artificial intelligence.
We maintain an overweight position in equities, consistent with our view that economic activity should remain resilient and even show signs of acceleration early in the year. These signs are expected to appear in Europe and the United States, but also in emerging markets. This is why we remain overweight in these regions.
Conversely, despite the announced public support measures, we believe the Japanese market is likely to suffer from an appreciating currency, which may erode part of its significant undervaluation.
*speculative
The opinions expressed (i) are considered reliable by LBP AM and are based on or justified by the economic, financial, stock market, and regulatory context, and (ii) are provided for informational purposes only.