The top-down outlook points to solid economic growth and the outperformance of equities versus bonds in the year ahead. However, we expect low returns for both equities and bonds, with the former vulnerable to a sizeable correction(s) and the latter to outright losses. Widespread investor optimism/complacency about equities and bonds leaves both asset classes increasingly vulnerable to disappointments. Financial markets are likely to be much more volatile in 2026 than most expected, making selectivity crucial within the major asset classes.
