Introduction
In our Year Ahead 2026, we asked whether AI and innovation could help markets and economies achieve “escape velocity,” overcoming the drag from rising debt, political uncertainty, and lingering inflation. As the first half of the year draws to a close, the answer so far appears to be yes. AI-linked semiconductor, chip equipment, and memory stocks have helped drive equity indices higher despite rising bond yields, geopolitical risks, and firmer inflation. Our base case remains that equities will move higher over the next six to 12 months, and we expect the S&P 500 to reach 8,200 by June 2027. We expect continued strength in AI capital expenditure, a resilient US economy, ongoing fiscal spending around the world, and strong credit creation to continue to support corporate earnings growth and markets more broadly.
At the same time, we remain mindful of a range of risks, including a loss of confidence in the AI growth story, weaker-than-expected delivery from the non-AI economy, and higher financing costs. In our view, this argues for staying constructive on risk assets, but also for broad diversification both within and across asset classes.
In equities, we remain constructive but think widening performance gaps between individual stocks make concentrated single-stock exposure increasingly risky. Despite diversification being at the core of our investment philosophy, our analysis suggests this risk is meaningful for many equity investors on our platform with self-managed portfolios: Excluding strategic holdings, nearly 40% of our equity investors hold more than half of their portfolio in just 10 stocks or fewer. We think the current environment reinforces the case for keeping a much more broadly diversified core portfolio at the center of equity allocation and complementing this with targeted exposure to structural growth opportunities. In fixed income, we see appealing risk-reward in quality bonds, as markets appear to be pricing in too many rate hikes, particularly if energy prices stay at lower levels. In commodities, we think investors should consider using the recent fall in energy prices to add exposure to diversified indices. In currencies, we expect the US dollar to remain well bid into the third quarter as the US economy stays resilient and US rates remain relatively high.
The first half of the year has shown how quickly narratives can shift, how costly excess cash can become when markets move higher, and how concentration can leave portfolios exposed if leadership narrows. We expect the market rally to broaden in the second half, calling for investors to stay invested and to diversify.
Conclusion
The outlook remains constructive, in our view. Innovation, resilient growth, and structural investment trends continue to support markets. But higher valuations and a wider range of macro and geopolitical risks mean investors need to think carefully about portfolio construction, managing concentration risks in particular. For investors, that argues for staying engaged, remaining selective about opportunities, and ensuring portfolios are anchored by a diversified core. In a market that still offers upside but is less forgiving of concentration and poor timing, discipline and diversification remain essential.