Core Insights - The global economy is expected to continue growing in 2026, avoiding recession despite ongoing risks, supported by strong fundamentals in equities and a new inflation regime affecting fixed income investors [1][3][4] - Active management is emphasized due to structural divergence within asset classes, with a preference for equities over bonds [2][3] Global Economic Outlook - Resilience in the global economy is noted, with supportive policies and lower interest rates expected to enhance economic momentum [3] - Real GDP growth is projected to remain under 2% globally, with the U.S. and Canada leading at an estimated annual growth of 1.5% [4] Asset Class Highlights - **U.S. Equities**: Strong fundamentals support equities, but stretched valuations and narrow leadership indicate a need for selectivity [3] - **Treasury Inflation-Protected Securities (TIPS)**: Inflation is expected to remain above average at about 3%, making TIPS a compelling hedge [3] - **Global Bonds**: Diversification through global government bonds is recommended as reliance on U.S. Treasurys is outdated [3] - **Private Assets**: The private credit landscape is evolving, with a shift towards more complex strategies due to tight spreads [3] - **Real Assets**: Infrastructure investments are highlighted as beneficiaries of long-term trends in technology and energy transition, providing resilience against inflation [3]

Core Insights - Global bonds have re-entered bull market territory, with Bloomberg's GlobalAgg Index rising over 20% from its 2022 low, marking the highest level since March 2022 amid a fixed-income rally [1][5] - The Federal Reserve is expected to reduce interest rates by 25 basis points next week, with some traders anticipating a half-point cut, as central banks respond to declining inflation and labor market pressures [2] - The bond rally has alleviated some pressure from political crises, such as the recent situation in France [3] Market Activity - There is strong demand in primary markets, with the European Union receiving over €98 billion ($115 billion) in orders for a 30-year bond and more than €70 billion for a five-year tranche [4] - The yield on global investment-grade corporate bonds has decreased for four consecutive days, reaching 4.26%, the lowest since August 2022 [4] Strategic Analysis - The rebound in Bloomberg's Global Aggregate Bond Index is not necessarily a sign of confidence in sovereign debt, as global corporate bonds have been the standout performers [5] - Longer-dated bonds in certain regions, particularly France, are facing pressure due to rising fiscal risks, highlighted by the recent political instability [6]