Perspectives
January 2, 2026

Macro Pulse for January 4: A Refresher On Our Outlook for 2026

As we kick off 2026, our Global Market Strategy team shares a refresher of their outlook for the year.

By Global Market Strategy Team

We have a constructive outlook for public and private capital markets in 2026. But when valuations are rich, market performance is narrow, and global policy shifts present steepening risks for sovereign curves globally, investors need to focus on the areas where they have highest conviction. As we kick off 2026, we’d like to offer a brief refresher of our top convictions for 2026.

Policy Support

As the U.S., Europe, Japan, and many other countries get later in their economic and credit cycles, the degree of policy support becomes a critical determinant for the 2026 outlook because it can extend the cycle. While we expect neutral-to-supportive policy environments in Europe, Japan, and China, we expect the U.S. to come out on top in extent of policy support from both the Fed (modest further easing; targeted liquidity support) and pro-growth fiscal policy (from the One Big Beautiful Bill Act and an inclination to further support the economy if growth falters ahead of the midterms).

Capital Markets Conditions

We believe U.S. capital markets conditions will remain constructive in 2026, supported by policy – but primarily because we expect AI to remain a concentrated driver of loose capital markets conditions, with earnings growth driving a strong pace of capital expenditures. A resilient market backdrop should contribute to further improvements in private markets activity. We remain optimistic about private markets’ resilience given strong credit quality, new sources of liquidity, and democratization of access.

Makeup of Economic Growth

We expect policy support and loose capital markets conditions to enable a virtuous cycle of strong corporate profitability, resilient employment conditions, and robust consumer spending. Because consumer activity comprises about two thirds of GDP in the U.S., the influence of profitability on employment expectations, and in turn the influence of employment on consumer health, is a critical underpinning of our constructive view.

Risks

Of course, the crystal ball is often a little cloudy. Upside risks to inflation and downside risks to the labor market are always present. For 2026, we highlight that the key trigger for a reacceleration of inflation has shifted from tariffs to the cycle itself: the “soft landing” has not allowed inflation to have a hard landing.

We are also mindful of risks that land outside the “realm of normalcy”: a loss of Fed independence, or overly stimulative fiscal policy ahead of the midterm elections. While neither is our base case, we believe these inflationary risks would be met with higher long rates.

For our in-depth base case view for 2026 and global risks, see our full outlook here.

Portfolio Strategy

Diversification and quality are two critically important portfolio construction approaches that have fallen by the wayside in the “lower for longer” era of the last 15 years. We believe both these themes are likely to pay next year as the credit cycle matures in the U.S., rewarding both disciplined selection and global diversification.

This material represents an assessment of the market environment as at a specific date; is subject to change; and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any funds or any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.

“New York Life Investments” is both a service mark, and the common trade name, of certain investment advisors affiliated with New York Life Insurance Company.