BlackRock’s senior portfolio managers and investment executives gather for two days to debate the outlook for the global
economy and markets – and its implications for portfolios. This 2026 midyear global outlook report, scarcity vs. abundance, captures those discussions.
The world’s current state is marked by scarcity: constrained labor, energy and fiscal space. This tension is embedded in a series of macro calls with very different outcomes - and should spur a portfolio rethink.
The key findings from the 2026 Midyear Global Investment Outlook Report include:
- Scarcity remains the dominant economic regime. Constraints across labour, energy, infrastructure, capital and critical materials are sustaining inflation and keeping interest rates structurally higher.
- AI could eventually unlock a major productivity and growth breakthrough, but the route to this “abundance” requires heavy investment in power, computing capacity, data centres, chips, skilled labour and physical infrastructure—intensifying scarcity first.
- Investors face several competing macro outcomes, including AI-led growth versus stagnation, falling versus persistently high rates, manageable versus stressed debt levels, temporary versus lasting geopolitical disruption, and continued versus weakening U.S. market leadership.
- Portfolios should not be built around a single central economic forecast. Investors should identify the macro assumptions already embedded in their holdings, size those exposures deliberately and use market-neutral or hedging strategies to reduce unwanted risks.
- Traditional static portfolios and 60/40 diversification are becoming less effective. Supply-driven inflation means bonds may fall alongside equities, while market concentration and cross-asset themes require more dynamic, granular portfolio management.
- Maintain an overweight position in U.S. equities, supported by strong corporate earnings and U.S. leadership in AI. However, selectivity is essential because valuations leave limited room for disappointment.
- Focus on AI bottlenecks rather than trying to predict the winning model or platform. Favoured exposures include power generation, electricity grids, memory, semiconductors, data centres and other critical AI infrastructure.
- Physical AI represents the next major frontier. Robotics, automation, drones and autonomous systems could create significant opportunities, but investors should prioritise enabling technologies—such as sensors, compute, power and safety infrastructure—where valuations remain supported by fundamentals.
- Higher yields have restored income as a meaningful portfolio anchor, but BlackRock favours short- and medium-term bonds over long-duration government debt. Preferred areas include euro-area government bonds, U.S. agency mortgage-backed securities and emerging-market local-currency debt.
- Long-term bonds should no longer be treated as a default defensive allocation. Persistent inflation, rising government borrowing and higher term premiums support underweight positions in long U.S. Treasuries, Japanese government bonds and long-duration investment-grade credit.
- Credit selection should focus on what genuinely supports repayment. Investors should assess recurring cash flow, collateral, maturity schedules, lender protections, liquidity and recovery value rather than relying on labels such as public bonds, direct lending or infrastructure debt.
- Move beyond traditional asset-class and geographic labels. Infrastructure, secure energy supply, grids, storage, critical materials and resilient supply chains cut across public and private markets. Outside the U.S., favour targeted active opportunities—particularly Latin American infrastructure, Japanese AI bottlenecks and selected European financials, industrials and infrastructure—rather than broad regional exposure.
