2026 Second-Half Investment Outlook

As we moved into the second half of 2026, global markets are navigating an increasingly complex environment shaped by artificial intelligence ("AI"), geopolitical developments, energy market disruptions and inflationary pressures. Leading fund houses ("Fund House(s)"), including Allianz Global Investors ("Allianz"), Fidelity International ("Fidelity"), Invesco and J.P. Morgan Asset Management ("JPM"), have shared their perspectives on the investment landscape ahead and how investors may position portfolios to navigate the opportunities and challenges that lie ahead.

Summary notes

The consensus across leading fund houses is clear^：while global markets are expected to continue offering investment opportunities in the second half of 2026, the overall investment landscape is becoming increasingly complex. In this environment, investment success is likely to depend more heavily on active management, disciplined security selection, and diversified portfolio construction.

• Artificial intelligence (AI) -driven capital expenditure and earnings growth remain the dominant investment theme of global markets, continuing to underpin the performance of risk assets;
• Asia and Emerging markets present compelling structural opportunities, though performance is expected to diverge significantly across regions. Outcomes will largely depend on each economy’s participation in the AI industrial chain and its exposure to commodity cycles;
• About short-term fixed income, Fund House(s) generally favour higher-quality and shorter-duration fixed income as a defensive source of income and portfolio resilience amid elevated inflation, geopolitical uncertainty and interest-rate volatility. The asset class is viewed as offering attractive carry with lower sensitivity to interest-rate movements compared with longer-duration bonds;
• Commodities are assuming a more prominent role amid ongoing geopolitical uncertainty and inflationary pressures. Their function within portfolios varies, serving not only as a source of investment opportunities, but also as a diversification tool and a means of gaining exposure to key macroeconomic trends.

Investment outlook details^#

1. Macro Outlook

These Fund House(s) generally agree that the global economy remains resilient, though it continues to face uncertainties stemming from inflation, energy markets, and geopolitical developments. As a result, the investment landscape is characterized by a “combination of growth opportunities and elevated risks” ¹:

• Allianz believes that the global economy is under pressure from multiple shocks but remains fundamentally resilient. Inflation is expected to stay above central bank targets, while dispersion across regions and asset classes is likely to widen. In this situation, investment returns are expected to depend increasingly on active security selection and diversified portfolio allocation;
• Fidelity views the macroeconomic backdrop as being shaped by both AI-driven growth and the impact of geopolitical developments and energy price fluctuations. Energy-related shocks may contribute to higher inflation while weighing on economic growth, resulting in greater divergence across markets and sectors;
• Invesco believes that, despite challenges arising from energy market disruptions and geopolitical risks, the global economy continues to demonstrate resilience. Ongoing investment in AI, capital expenditure growth, and healthy corporate and household spending are expected to remain supportive of economic expansion;
• JPM highlights the risk of stagflation—a combination of moderating economic growth and persistent inflation. The fund house also notes that interest rates are likely to remain elevated, with the future path subject to considerable uncertainty.

Figure 1：Historical policy rates and market implied forward rates

(Source: Bank of England, Bank of Japan, Bloomberg, European Central Bank, FactSet, U.S. Federal Reserve, J.P. Morgan Asset Management. *Expectations are based on forward swap rates. Past performance and forecasts are not a reliable indicator of current and future results.

Guide to the Markets – Asia. Data reflect most recently available as of 28/05/26.)

2. Equities

About U.S. equities², Fund House(s) agree that earnings growth driven by AI continues to provide strong support for the U.S. equity market. However, Fund House(s) also emphasize(s) the risks associated with market concentration and elevated valuations:

• Allianz cautions investors to remain mindful of valuation levels and concentration risks. As AI increasingly becomes an important driver of performance in emerging markets as well, investors should carefully manage concentration risk through broad diversification across asset classes, sectors, and regions;
• Fidelity notes that recent market gains have been driven predominantly by a small number of large-cap technology companies, resulting in a structurally concentrated market environment;

Figure 2：Big tech is going bigger on AI

(Source: Fidelity International, Bloomberg, May 2026. Chart shows Bloomberg consensus estimates for 2-year blended forward capex.)

• Invesco believes that the U.S. economy continues to benefit from its energy independence, resilient consumer spending, and a sustained AI investment cycle. AI remains a key driver of corporate earnings growth and market performance.
• JPM likewise highlights market concentration risk, while noting that profit margins among software and semiconductor corporates have expanded significantly. The Fund House believes that robust earnings growth within these sectors continues to provide fundamental support for U.S. equities.

Figure 3：Net margins (last 12 months, quarterly)

(Source: FactSet, S&P Global, J.P. Morgan Asset Management. IGV = iShares Expanded Tech-Software ETF. SOXX = iShares Semiconductor ETF. Net profit margins measure total profitability after all overhead and expenses. Data reflect most recently available as of 19/05/26.)

About Asia equities, Fund House(s) generally agree that Asia remains a key beneficiary of the AI investment cycle, supported by growing demand across semiconductors, AI infrastructure and related technology supply chains. While earnings growth and structural AI trends remain supportive, Fund House(s) also highlight the importance of selectivity amid elevated valuations, market concentration and geopolitical uncertainties.

• Allianz is constructive on Asia equities, citing opportunities from AI, infrastructure and industrial investment trends. It highlights China's expanding AI ecosystem and sees Taiwan and South Korea as beneficiaries of strong AI-related demand.
• Invesco expects Asia to benefit from a durable AI infrastructure build-out and strengthening technology exports. It highlights Taiwan and South Korea as beneficiaries of semiconductor and memory-chip demand, while Japan is supported by fiscal stimulus and technology investment.
• Fidelity views AI-driven growth as a dominant investment theme across Asia and favors markets with strong exposure to AI infrastructure and semiconductor demand. It is positive on South Korea, Taiwan and China, while also seeing opportunities in Japanese mid-cap equities due to improving domestic demand and governance reforms. However, it cautions that valuations in some AI-related sectors have become increasingly stretched.
• JPM believes AI opportunities are broadening across the technology supply chain and identifies Korea and Taiwan as key beneficiaries of AI hardware investment. It also notes that Japan's corporate governance reforms could support equity performance, while warning that market concentration in AI-related stocks may increase volatility.

Figure 4：Hang Seng tech vs. U.S. software companies Price return (rebased to 100 = Dec 2023, local currency)

(Source: Bloomberg, Hang Seng, S&P Global, J.P. Morgan Asset Management calculations. Data reflect most recently available as of 31/05/26.)

About European equities³, Fund House(s) acknowledge(s) that European markets continue to face headwinds from energy-related challenges and slower economic growth. However, Invesco also highlights the potential for a cyclical recovery, supported by fiscal stimulus and a normalization of energy supply conditions; Fidelity points out that elevated energy prices continue to weigh on the European economy.

 Figure 5：Energy-related shocks continue to affect Europe’s economic growth and inflation dynamics.

(Source: Fidelity International, May 2026.)

3. Fixed Income⁶

Fixed income has become more attractive than in recent years, though the Fund House(s) hold differing views on which segments of the bond market offer the most compelling investment opportunities:

• About short-term fixed income, Fund House(s) generally favour higher-quality and shorter-duration fixed income as a defensive source of income and portfolio resilience amid elevated inflation, geopolitical uncertainty and interest-rate volatility. The asset class is viewed as offering attractive carry with lower sensitivity to interest-rate movements compared with longer-duration bonds;
• Allianz believes that bonds have regained their attractiveness. The Fund House favours actively managing duration exposure and high-quality credit, with a particular emphasis on active management and rigorous credit selection;
• Fidelity observes that investors are increasingly favouring global short-duration strategies due to their attractive yields, lower interest-rate sensitivity and higher liquidity. Fidelity also highlights short-duration credit as a defensive way to generate carry while preserving portfolio resilience in a structurally higher inflation environment.
• JPM believes that interest-rate trajectories have been substantially repriced by markets, while policy divergence among major central banks has become increasingly pronounced. At the same time, elevated cash yields have enhanced the attractiveness of income-generating assets across fixed-income markets.

Figure 6：Private and public yields vs. benchmark (Monthly)

(Source: Bloomberg, FactSet, Federal Reserve Bank of New York, J.P. Morgan Credit Research, KBRA DLD, J.P. Morgan Asset Management.

Private credit: yield to maturity from the KBRA DLD Index. Leveraged loans: yield-to-maturity from the J.P. Morgan Leveraged Loan Index. High yield bonds: yield to worst from the Bloomberg U.S. Corporate High Yield Index. SOFR: 90-day average Secured Overnight Financing Rate. Past performance is not a reliable indicator of current and future results.

Guide to Alternatives. Data reflect most recently available as of 30/04/26.)

4. Commodities⁷

The Fund House(s) agree(s) that commodities are becoming increasingly important within investment portfolios. However, the views are centred more on commodities’ role as a hedge against risks and as a strategic macro allocation tool, rather than on a purely directional bullish outlook:

• Allianz views commodities as a key portfolio diversification tool that can enhance portfolio resilience and help mitigate risks across different market environments. While remaining constructive on gold, Allianz maintains a more neutral stance on oil and other commodities, using commodity exposure primarily as a diversification tool amid geopolitical uncertainty and inflation risks;
• Fidelity believes that commodities are supported by both geopolitical uncertainty and structural demand trends. In addition, commodities can serve as an important diversifier at a time when the hedging effectiveness of traditional asset classes may be diminishing. Fidelity further highlights commodities, particularly energy-linked commodities, as an effective hedge against inflation and geopolitical risks, while also supporting commodity-exporting economies and currencies such as Australia;
• Invesco considers the potential closure of the Strait of Hormuz, and the resulting disruption to global energy supplies and higher oil prices, to be among the most significant macroeconomic variables currently facing markets. At the same time, the continued build-out of AI-related infrastructure is expected to drive sustained demand for key commodities, particularly copper, given its critical role in supporting data centre development;
• On oil specifically, Invesco and JPMorgan view oil prices as highly dependent on developments surrounding the Strait of Hormuz and global energy supply disruptions, with oil acting as a major driver of inflation expectations and global growth outcomes; Fidelity sees energy-related commodities as valuable portfolio hedges during geopolitical shocks and inflationary periods, while Allianz maintains a neutral stance on oil despite acknowledging elevated energy market risks. Overall, oil is primarily viewed as a tool for portfolio protection and a critical determinant of the macroeconomic environment, rather than a high-conviction directional investment theme.

5. Key Risks⁸

Inflation, geopolitical developments, and policy uncertainty remain the key sources of risk. In addition, investors should remain attentive to potential challenges arising from the AI investment cycle and growing fiscal pressures:

• Allianz identifies persistently elevated inflation, higher-for-longer interest rates, and increasing divergence in macroeconomic outcomes as the principal risks facing markets. Combined with ongoing geopolitical uncertainty, these factors could result in a wider range of potential market outcomes and heightened volatility;
• Fidelity believes that energy price fluctuations and geopolitical developments remain the primary sources of risk. These factors can affect market performance through their impact on inflation and economic growth, while also contributing to greater divergence across regions and sectors;
• Invesco highlights several key risks, including the potential for energy supply disruptions to exacerbate stagflation pressures, a more hawkish-than-expected stance from central banks, a slowdown in AI-related capital expenditure, and worsening fiscal conditions among major economies. Any of these developments could weigh on economic growth, compress market valuations, and weaken the performance of risk assets.

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#For details and the exact wording adopted by these Fund House(s) on particular investment outlook, please study relevant documents issued by respective fund house as listed out in Section "Source document(s) of 2026 Mid-Year Market Outlook of Fund House(s) “of this document. The information contained herein is derived from publicly available market information and is for reference only.

Source

Source document(s) of 2026 Mid-Year Market Outlook of Fund House(s):

• Allianz House View Q3 2026: Shock absorption，as of June 2026
• Fidelity Global Outlook: The shock absorbers，as of June 2026
• Invesco 2026 midyear outlook: A world disrupted? Resilience endures，as of June 2026
• JPM Mid-Year Outlook 2026 | Don’t park the bus，as of June 2026

Source of each section in this document:

^ Section “Summary notes”: Please refer to “Source document(s) of 2026 Mid-Year Market Outlook of Fund House(s)”

1. Section “Macro Outlook”

• Allianz < House View Q3 2026: Shock absorption > Page 2.
• Fidelity < Global Outlook: The shock absorbers > Page 4-5.
• Invesco < 2026 midyear outlook: A world disrupted? Resilience endures > Page 2-8.
• JPM < Mid-Year Outlook 2026 | Don’t park the bus > Page 3，12.

2. Section “About U.S. equities”

• Allianz < House View Q3 2026: Shock absorption<span style="color: rgb(84, 83, 89);"> > Page 2.
• Fidelity < Global Outlook: The shock absorbers > Page 7.
• Invesco < 2026 midyear outlook: A world disrupted? Resilience endures > Page 3，10，14.
• JPM < Mid-Year Outlook 2026 | Don’t park the bus > Page 6.

3.Section “About Europe equities”

• Allianz < House View Q3 2026: Shock absorption<span style="color: rgb(84, 83, 89);"> > Page 4.
• Fidelity < Global Outlook: The shock absorbers > Page 5.
• Invesco < 2026 midyear outlook: A world disrupted? Resilience endures > Page 3，6，10.
• JPM < Mid-Year Outlook 2026 | Don’t park the bus > Page 9.

4.Section “About Asian equities”

• Allianz < House View Q3 2026: Shock absorption<span style="color: rgb(84, 83, 89);"> > Page 6.
• Fidelity < Global Outlook: The shock absorbers > Page 7，11.
• Invesco < 2026 midyear outlook: A world disrupted? Resilience endures > Page 3，13-14.
• JPM < Mid-Year Outlook 2026 | Don’t park the bus > Page 7.

5.Section “About Artificial Intelligence”

• Fidelity < Global Outlook: The shock absorbers > Page 7.
• Invesco < 2026 midyear outlook: A world disrupted? Resilience endures > Page 3，14.
• JPM < Mid-Year Outlook 2026 | Don’t park the bus > Page 6.

6.Section “Fixed Income”

• Allianz < House View Q3 2026: Shock absorption<span style="color: rgb(84, 83, 89);"> > Page 6.
• Fidelity < Global Outlook: The shock absorbers > Page 6.
• Invesco < 2026 midyear outlook: A world disrupted? Resilience endures > Page 8，15.
• JPM < Mid-Year Outlook 2026 | Don’t park the bus > Page 12，14.

7.Section “Commodities”

• Allianz < House View Q3 2026: Shock absorption<span style="color: rgb(84, 83, 89);"> > Page 6.
• Fidelity < Global Outlook: The shock absorbers > Page 4.
• Invesco < 2026 midyear outlook: A world disrupted? Resilience endures > Page 16.
• JPM < Mid-Year Outlook 2026 | Don’t park the bus > Page 2，4.

8.Section “Key Risks”

• Allianz < House View Q3 2026: Shock absorption<span style="color: rgb(84, 83, 89);"> > Page 2.
• Fidelity < Global Outlook: The shock absorbers > Page 4-5.
• Invesco < 2026 midyear outlook: A world disrupted? Resilience endures > Page 16.
• JPM < Mid-Year Outlook 2026 | Don’t park the bus > Page 6，9，12.

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