Connectively experts on elevated CAPE ratio

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So just how pricey is the U.S. stock market compared to Canada and international stocks? Robert Shiller’s CAPE ratio is the valuation metric that most financial gurus and experts point to in answering this question. In his Michael James on Money blog republished here last week, Michael J. Wiener provided a useful definition of the CAPE Ratio and how he uses it in his own portfolio. See How I handle high stock prices in my portfolio.

In this blog, we once again polled dozens of financial experts and business owners on both sides of the border via Linked In and Connectively.

We’ve picked roughly a dozen of the 34 responses submitted, presented below, with subheads summarizing the main points made in each submission.  Linked to their respective websites are contained in the italicized bios that end each contribution.

Here’s how we posed the question at Connectively:

What is your current view of US and global stock market valuations? Based on Robert Shiller’s CAPE ratio do you regard US and global/Canadian stocks as fairly valued or in danger of being overvalued and vulnerable to a major correction? If so, what actions would you suggest investors take, depending on their age and risk tolerance?

Waiting for CAPE ratios to normalize can also cost you

Based on Shiller’s CAPE ratio, U.S. stock valuations have been quite elevated from their historic average for some time now, but the readers who kept hoping for the CAPE to normalize before buying have basically missed an entire decade of gains, which makes me very skeptical of relying solely on CAPE ratios to time the market.

What I recommend telling the people is that high CAPE implies certain things about low future return on investment over the following 10 years, but nothing can be said about the upcoming months or the upcoming year: that’s the most important point for those building a strategy for the future, and not reacting to the headlines.

Those who still have decades to go before reaching Retirement should probably just keep all the money invested and use dollar cost averaging as the main way to get through the volatility period. In case of those approaching retirement (within 5-10 years), it would be wise to reassess the allocations, have enough cash to survive at least one or two years without investing anything, and maybe increase the allocation in non-US markets, as they currently trade at relatively more attractive multiples (Canada and Europe).

My concern with MintWit readers is not overvaluation itself: but that people would panic-sell during the upcoming market correction due to ignoring their risk tolerance for many years during the growth period. — Scott Brown, Founder, MintWit

Rebalance away from high-multiple growth equities into defensive dividend assets, short-duration bonds, and cash equivalents

Based on the Shiller cyclically adjusted price-to-earnings ratio, I view United States equity valuations as historically elevated and vulnerable to a correction. Conversely, international and Canadian equities trade at more reasonable multiples, offering comparatively defensive valuation buffers.

In this environment, asset allocation must align with individual horizons and risk tolerance. Younger investors with long horizons and high risk tolerance should maintain disciplined dollar-cost averaging into global indexes while tilting toward undervalued non-US markets. Meanwhile, older investors and conservative individuals nearing retirement should actively de-risk portfolios. I recommend rebalancing away from high-multiple growth equities into defensive dividend assets, short-duration bonds, and cash equivalents to preserve accumulated wealth against drawdown risk. — RUTAO XU, Founder & COO, TAOAPEX LTD

A high CAPE is not a signal to panic or exit, it is a signal to temper expectations and rebalance toward your actual targets

The number tells the story better than any opinion could. The Shiller CAPE ratio for the S&P 500 sits at roughly 42 as of August 2026, more than double the long run historical median of 17, and only 18 months in over a century of data have ever read higher, all of them clustered around the year 1999. That is not moderately expensive, that is rare territory, the kind the market has visited only once before.

History does not treat a high CAPE as a countdown clock. It has almost no power to call the next 12 months, and the market spent most of the 1990s looking expensive by this same measure while doubling anyway. What it does predict, fairly consistently, is weaker average returns over the following decade, not a specific crash date.

Globally the picture is not uniform either, since markets like Taiwan, South Korea, and Japan currently show some of the richest valuations after a sharp rally, while earnings growth there has kept ordinary P/E multiples looking more reasonable than CAPE alone suggests. The lesson I would offer is this: A high CAPE is not a signal to panic or exit, it is a signal to temper expectations, rebalance toward your actual targets, and make sure your risk exposure matches your time horizon, not the headline. — Swayam Doshi, Founder, Suspire

“The U.S. stock market is undeniably skating on historically thin ice.”

Let’s get the legal record straight first: I am a consumer finance and bankruptcy attorney, not a Wall Street portfolio manager or a licensed investment advisor. My daily work involves helping people survive the financial wreckage of bad decisions, not predicting market tops. But after thirty years watching market cycles pop and drop, I know exactly what overvaluation looks like right before it hits my desk in the form of Chapter 7 bankruptcy petitions.

If we look at Robert Shiller’s Cyclically Adjusted Price-to-Earnings (CAPE) ratio, the U.S. stock market is undeniably skating on historically thin ice. With the U.S. CAPE ratio consistently hovering well above its long-term historical average of about 17, equities are priced for absolute perfection in a world that is notoriously messy.

While global and Canadian stocks are valued somewhat more reasonably, a severe correction in New York will inevitably drag Toronto, London, and Tokyo down with it. The market is vulnerable, and ignoring this is a luxury only the financially reckless can afford.

The action you should take depends entirely on your financial runway:

For Boomers and those near retirement, “sequence of returns risk” is your mortal enemy. If the market corrects 20% tomorrow and you are forced to sell equities to fund your daily life, your portfolio may never recover. My advice? De-leverage aggressively. Enter retirement completely debt-free. Build a two-year cash or short-term Treasury cushion completely outside the stock market. This ensures that if the market takes a dive, you can live off your cash buffer without being forced to sell your depreciated stocks at clearance-sale prices.

For Gen Z and Millennials, a major market correction is actually a gift. You have the ultimate asset on your side: time. If the market drops, do not panic, do not look at your account balance, and under no circumstances should you sell. Keep your job, protect your emergency fund, and continue dollar-cost averaging into broad, low-cost index funds. You are simply buying world-class assets on sale, and your future self will thank you.

Valuations tell us about the market weather, but your personal debt levels and emergency reserves determine whether your financial house will survive the storm. Do not let market greed outpace your common sense. — Lyle Solomon, Principal Attorney, Oak View Law Group

This is “not a market screaming for a correction. It is a market with very little margin of safety left …”

I’d rather answer this with our own numbers than with a CAPE reading, because CAPE describes an index and says almost nothing about the company someone actually owns.

Across the 881 U.S. and European companies we cover, our valuation model currently rates 67% fairly valued, 24% undervalued and 9% overvalued. Of the 487 names where we publish a fair-value estimate, 31% already trade above it, and the median remaining upside on the rest is 14.5%.

That is not a market screaming for a correction. It is a market with very little margin of safety left, which is a different and less dramatic problem. A high CAPE has preceded flat decades and strong ones; as a timing signal it has been unreliable enough that acting on it has cost more than ignoring it. What it does tell you reliably is that a dollar invested today buys less future earnings than it used to.

On what investors should do about that, split by age and risk tolerance: I can’t answer that responsibly. Those decisions turn on income stability, time horizon, existing holdings and tax position, none of which I can see, and one answer covering everyone would be worth less than no answer.

The discipline that survives the question is narrower and duller: when the median name carries thin upside, the edge comes from refusing to overpay, not from predicting the turn. That is a rule about your own behaviour, and it needs no forecast. — Razvan Luca, Founder, Talval Research

“Nobody, at any age, should bet money they need within five years on today’s prices.”

The honest read: Shiller’s CAPE ratio has been sitting well above its long-term historical average for years, and when valuations stretch that far, forward returns over the next decade tend to disappoint.

That doesn’t guarantee a crash next quarter, but it tells you the margin of safety is thin. US stocks look expensive; Canadian and broader global markets trade at meaningful discounts, which is exactly why diversifying across geographies matters more than conviction in one hot market.

My advice by age and risk tolerance is straightforward. If you’re under 40, stay invested, keep buying through any correction, and let time do the heavy lifting; volatility is your friend when you’re accumulating. If you’re 40 to 55, this is the window to rebalance, trim concentrated winners, and shift some exposure toward undervalued international markets and bonds so a 30 percent drawdown doesn’t wreck your timeline.

If you’re near or in retirement, you can’t afford to ride out a lost decade, so hold two to three years of expenses in cash and short-term instruments and keep the rest diversified. Nobody, at any age, should bet money they need within five years on today’s prices.

I run the free QR code generator at Scale By SEO, and the discipline transfers more than people think. We never promise clients outcomes we can’t measure; that’s why our SEO plans carry a six-month performance guarantee where work continues for free if KPIs aren’t met. I bring that same skepticism to markets: demand evidence, demand accountability, and never confuse a bull market for skill. Before we publish guidance, we research it, and before you act on valuation fears, you should too.

Overvalued markets don’t have to crash; they can simply grind sideways for years, and the investors who win are the ones who sized their risk properly long before headlines turned negative. Position for the world as it is, not as you hope it becomes. — Melissa Basmayor, Marketing Coordinator, Freeqrcode.ai

“CAPE should influence portfolio construction, not dictate market timing.”

My current view is that U.S. equities look expensive, and CAPE is flashing a genuine long term warning, but I would not use it as a signal to call the next crash.

The S&P 500 CAPE is around 41 to 42, far above its long-term average and close to historically extreme levels. That suggests future real returns from U.S. equities could be much lower than investors have become accustomed to. Vanguard also currently describes U.S. equity valuations as effectively at their highest historical percentile.

I would be more comfortable with international and Canadian equities than simply owning more U.S. mega cap technology, although they are not immune to a correction. The Bank of Canada itself says Canadian equity valuations remain elevated and increasingly stretched compared with history. So I would call the US clearly expensive, Canada and many international markets less extreme, but not cheap. Continue Reading…

HDIV: All-In-One Canadian Income & Growth ETF Turns 5 years old

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Hamilton ETFs

By Hamilton ETFs

(Sponsor Blog)

Last month marked the fifth anniversary of the launch of the Hamilton Enhanced Canadian Covered Call ETF (HDIV), Canada’s very first modestly levered (or “enhanced”) covered call ETF, and there are many reasons to celebrate this marriage of income and growth strategy.

The idea for HDIV was born out of one question: can covered call ETFs be improved? Designed to provide higher monthly income, covered call ETFs have been a rapidly growing segment of the ETF market for several years, but the reality is the strategy does cap your potential upside in exchange for the tax-efficient income it provides.

We thought of a game-changing way to help mitigate this yield/return trade-off: add modest 25% leverage to generate higher monthly income and participate in more upside growth potential.

HDIV Growth and Performance

HDIV has grown to assets under management (AUM) of ~$1.8 billion since inception in July 2021, making it our second-largest ETF after the Hamilton Canadian Financials YIELD MAXIMIZER™ ETF (HMAX).

HDIV’s growth in assets has been impressive, and the fund has also delivered strong performance. Since inception, HDIV has delivered an annualized total return of 19.3%, outperforming the S&P/TSX 60 and the S&P 500 index over the same period[1].

HDIV Performance Highlights:

  • Annualized total return (including dividends) of 19.3%, versus 15.2% for S&P/TSX 60 and 15.6% for S&P 500 (CAD).
  • Outperformed the S&P/TSX 60 in calendar years 2022, 2023, 2024 and 2025 by 3.7%, 1.8%, 2.1% and 4.7%, respectively[2].
  • 14 distribution increases for a total distribution increase of 64% since inception[3].
  • Attractive yield, currently 9.99% — versus 2.29% for S&P/TSX 60[4].

 

What does $100,000 invested in HDIV since day 1 look like?

If you invested $100,000 in HDIV at launch, your investment would be $244,000 with reinvested distributions, as seen in the chart above. Assuming you did not reinvest your distributions, your invested capital grew from $100,000 to $144,875 and you received $56,950 in cash. The chart below shows your total annual income from HDIV and capital growth over five years. So you did not just receive cash flow; your capital appreciated as well.

What has driven HDIV’s performance?

Every aspect of our ETFs is carefully thought-out and tested with the intention that they be long-term responsible investments, and HDIV is no exception. Two structural features have been central to HDIV’s success: modest leverage and broad sector diversification.

Enhanced Structure

HDIV has an enhanced structure with modest leverage of 25%, achieved by borrowing at relatively lower institutional rates. How does this work? For every $100 you invest, HDIV borrows an additional $25, investing a total of $125 in its portfolio and amplifying the fund’s overall yield and growth potential.

Of course, investors should keep in mind that leverage can work both ways, amplifying growth during market rallies as well as losses during downturns. While leverage does add risk and volatility to your portfolio, HDIV only has a modest amount.

Broad Sector Diversification with Blue-Chip Holdings

HDIV is an ETF made up of 10 sector-focused, blue-chip covered call ETFs from our YIELD MAXIMIZER™, Enhanced Growth and DayMAX™ suites. Their weightings have been chosen with the aim of giving HDIV a sector mix broadly similar to that of the S&P/TSX 60.

HDIV’s focus on high-quality stocks is clear when you examine its underlying holdings, which are primarily leading large-cap companies with strong fundamentals. Around 44% of HDIV’s underlying holdings are the largest Canadian financial stocks like the Big Six banks and Canada’s largest insurance company by total assets, Manulife Financial[6]. Energy and technology giants account for over 30% of the fund[7].

 

We also believe HDIV’s underlying holdings are an improvement in the breadth of the S&P/TSX 60 index. Certain Canadian sectors, like energy and technology, are heavily concentrated in a very small number of large-cap stocks. HDIV addresses this lack of diversification by including leading U.S. companies. For example, HDIV holds market leaders like Apple and Microsoft through the Hamilton Technology YIELD MAXIMIZERTM ETF (QMAX) and the Hamilton Enhanced Technology DayMAXTM ETF (QDAY).

The Hamilton ETFs advantage with covered call strategies

As a member of the Hamilton ETFs line-up, HDIV’s underlying covered call strategy is managed by our options team, which has 60+ years of combined experience and is led by Chief Options Strategist Nick Piquard.

Five years in

Five years after HDIV’s launch, we believe the results provide a tangible answer to our original question: can covered call ETFs be improved? HDIV has paired strong total returns with growing monthly distributions and broad diversification, clearly resonating with investors who have helped grow the ETF to more than $1.8 billion in assets. Its first five years have, in our view, demonstrated how an enhanced covered call structure can combine capital growth with a stream of monthly income.

Trivia

The AI investment boom is so big, it’s reshaping economies. What 19th century technological breakthrough triggered an even greater U.S capital spending spree (as a percentage of GDP)?

Hint: The two biggest holdings in Hamilton Utilities YIELD MAXIMIZER™ ETF (UMAX) are involved in this industry.

Answer: Railways.

Disclaimer

Certain statements contained in this article may constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking information may relate to a future outlook and anticipated distributions, events or results and may include statements regarding future financial performance. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “anticipate”, “believe”, “intend” or other similar expressions concerning matters that are not historical facts. Actual results may vary from such forward-looking information. Hamilton ETFs undertakes no obligation to update publicly or otherwise revise any forward-looking statement whether as a result of new information, future events or other such factors which affect this information, except as required by law.

The S&P 500 Index and the S&P/TSX 60 Index (“Indices”) and associated data are a product of S&P Dow Jones Indices LLC, its affiliates and/or their licensors and have been licensed for use by Hamilton ETFs © 2026 S&P Dow Jones Indices LLC, its affiliates and/or their licensors. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices, please visit www.spdji.com. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC (“SPFS”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Neither S&P Dow Jones Indices LLC, SPFS, Dow Jones, their affiliates nor their licensors (“S&P DJI”) make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and S&P DJI shall have no liability for any errors, omissions, or interruptions of any index or the data included therein.

Commissions, management fees and expenses all may be associated with investments in exchange traded funds (ETFs) managed by Hamilton ETFs. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in per unit value and reinvestment of all dividends or distributions and does not take into account sales, redemptions, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Only the returns for periods of one year or greater are annualized returns. ETFs are not guaranteed, their values change frequently, and past performance may not be repeated.

[1] Based on total annualized returns since inception on July 19, 2021. As at July 31, 2026. Source: Bloomberg

[2] Source: Bloomberg

[3] Distributions are not guaranteed, may fluctuate and are subject to change and/or elimination.

[4] Current annualized yields as at July 31, 2026. The yield calculation excludes any additional year end distributions and does not include reinvested distributions. Source: Bloomberg, Hamilton ETFs.

[5] Source: Solactive AG, Bloomberg, Hamilton ETFs. Data from July 19, 2021 to July 31, 2026.

The graph illustrates the growth of an initial investment of $100,000 in HDIV vs the S&P/TSX 60 Index with annual compounded total returns. The graph is for illustrative purposes only and is intended to demonstrate the historical impact of the compound growth rate. It is not a projection of future performance, nor does it reflect potential returns on investments in HDIV. Investors cannot directly invest in the index. All performance data assumes reinvestment of distributions and excludes management fees, transaction costs, and other expenses which would have impacted an investor’s returns.

[6] As at July 31, 2026

[7] As at July 31, 2026

 

 

 

 

Implementing the FIRE Approach to Car Ownership

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Pexels: Melvin CJ

By Dan Parks

Special to Financial Independence Hub

Transportation is a necessary expense, but it’s also one of the highest ongoing costs for many households.

If you’re pursuing Financial Independence, Retire Early (FIRE), choosing the right car is only part of the equation. The way you buy, finance and own your car can also affect how much money you have available to invest.

Here are ways to apply FIRE principles to car ownership without sacrificing reliability or everyday convenience.

Start with the Total Cost of Ownership

A low monthly payment doesn’t necessarily mean you’ve found the right car for your FIRE plan. Instead of focusing on what fits your budget today, think about what the vehicle will cost over the entire time you expect to own it. You’ll want to look outside of the purchase price and estimate the expenses you’ll face throughout ownership.

According to AAA’s 2025 study, the average cost of owning a new vehicle driven 75,000 miles over five years is $11,577 per year, or about $965 each month. That estimate includes:

  • Financing
  • Depreciation
  • Fuel
  • Insurance
  • License, registration and taxes
  • Maintenance, repair and tires

Depending on your situation, you may also want to account for parking, tolls, accessories, home charging equipment for an Electric Vehicle or any upgrades you plan to make after purchase. Looking at the full cost of ownership gives you a stronger basis for comparing vehicles. A car with a higher purchase price may still cost less to own over time if it holds value well, uses less fuel and requires fewer repairs.

Buy a Car that serves your Purposes

Once you know what you can comfortably afford, choose a vehicle that fits your everyday life. Think about your commute, the number of passengers you usually carry, local weather and road conditions and any work or family responsibilities your car needs to handle. It’s also important to keep reliability in mind, since a well-built car can help you avoid unexpected repair costs and stay on the road for many years.

As your income grows, your vehicle budget may grow too. Before committing to a more expensive model, consider how it fits with your long-term FIRE goals. Many people in the movement use the Rule of 25, which estimates the amount needed for retirement based on annual spending and a 4% maximum portfolio withdrawal rate. Many also aim to withdraw only 3% to 4% of their savings each year, adjusted for inflation.

Every recurring expense influences that calculation, so choosing a reliable vehicle with reasonable ownership costs can help you stay on track and enjoy dependable transportation.

Treat Financing as a Financial Decision

How you pay for your car deserves the same careful thought as choosing the vehicle itself. If paying cash still leaves you with a healthy emergency fund and keeps your investment goals on track, you can avoid interest charges altogether. Financing can also fit your FIRE plan if it helps you manage your cash flow and supports your long-term financial priorities.

If you decide to apply for a loan, check your credit score and credit history. Lenders commonly group borrowers into FICO score tiers. Generally, a score of 670 or higher is considered good, and a better credit profile can help you qualify for a lower interest rate. That can reduce the total amount you repay over the life of the loan, giving you more money to invest. When comparing lenders, evaluate the interest rate, loan term and total repayment amount so you understand the full cost of borrowing.

Maximize the Value of every year you own the Car

A car becomes more valuable to your FIRE journey as it continues to serve you reliably. Extending its lifespan allows you to spread the purchase price and depreciation across more years. This helps you reduce your average transportation costs over time. For many people, keeping a well-maintained vehicle longer can free up money that would otherwise be used for another large purchase.

Reaching that point takes consistent care, though. You need to follow the manufacturer’s service schedule, replace worn parts before they fail and address small issues promptly to help your car stay dependable. A modern car from a brand with a good reputation for reliability may reach 200,000 miles or more when serviced according to the recommended intervals. You can also reduce ongoing costs by reviewing your insurance each year, comparing quotes and adjusting your coverage when your circumstances change.

Review Car Ownership like any other Investment Decision

Your car shouldn’t stay on autopilot after you buy it. Just as you review your portfolio from time to time, your vehicle deserves a regular financial check-in to make sure it still supports your FIRE goals. So, once a year, look outside routine expenses and assess the bigger picture. Analyze how much you’re spending on fuel, insurance, maintenance and repairs, then ask whether your current vehicle still matches your lifestyle.

A longer commute, a growing family or changes to your work could all influence what you need from a car. Plus, increasing repair bills or declining reliability may suggest it’s time to explore another option. Making these evaluations regularly helps you avoid costly decisions driven by habit or impulse. Regular reviews also help ensure your transportation costs continue supporting your long-term goals.

Driving toward Financial Independence

Implementing the FIRE approach to car ownership begins before you receive the keys and continues throughout the vehicle’s life. Always look at the total ownership costs, choose a car that fits your needs, finance carefully and review your expenses regularly so that you can keep transportation costs aligned with your financial goals. Those intentional decisions can free up more money to invest and bring Financial Independence within closer reach.

Dan Parks is a senior writer at Modded.com. Based in Washington, D.C., Dan has a proven track record of distilling complex subjects into accessible narratives across various fields. His expertise in clear communication and meticulous research makes him a valuable contributor to discussions on personal finance and investment strategy, helping readers navigate intricate topics with ease. Dan is dedicated to providing readers with well-researched insights to foster financial literacy and independence.

Retired Money on The Wealthy Barber’s retirement at the end of this year

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My latest MoneySense Retired Money column looks at the imminent retirement of The Wealthy Barber himself: David Chilton. You can find the full column here:  The Wealthy Barber retires.

Chilton, who will reach the traditional retirement age of 65 late this October, announced in June on his popular YouTube podcast that  he’d be retiring at the end of 2026, a story soon picked up by the Globe & Mail.

My Retired Money column has focused on individual retirements now of Rob Carrick and blogger Mark Seed. Like Chilton, these people are younger than myself: I describe myself as only semi-retired, which is how I view Carrick and Seed. On his two-year-old The Wealthy Barber podcast, Chilton has now twice interviewed Carrick about his Retirement and also about his views on the high costs of housing.

As my MoneySense interview with him clarifies, Chilton views his transition as being closer to the traditional “Full Retirement” than the more gradual semi-retirement that Carrick and I are practicing. My view of Traditional Retirement is leaving a full-time salaried employee relationship and all that entails: commuting to a central place, bosses and meetings, taxes withheld at source, etc. Of course, Chilton has seldom if ever been an employee: he’s been a self-employed author and public speaker almost from the get-go. But as he reveals, his successful speaking career meant doing a lot of business travel and committing his time in advance: something he now wishes to reduce in order to have more personal freedom.

When and if he does pack it in in December, it will end an intense few years where he “aggressively” participated again in the Canadian personal finance content space that he helped pioneer in the first place.

Apart from public speaking, which he will cut back on in 2027, Chilton launched a successful biweekly podcast on YouTube that soon became weekly, promoted through video shorts on Facebook and TikTok. I can see how weekly podcasts could constitute almost a full-time job in itself so it should be no surprise that he will wind that up at the end of the year, despite the fact many around him would like to see it continue in some form.

Rewritten Canadian edition of The Wealthy Barber took longer to do than the original

The other big push he made was a massive two-year extensively rewritten 2025  Canadian edition of the book that made his career when he published it at age 27 in 1989. Chilton says it took him longer to revise (rewrite)  the new edition than to write the original! His focus is on Canadians 45 years old or younger, many of whom are struggling to get a toehold in the housing market (which includes my own daughter). Continue Reading…

The World didn’t break: Franklin Templeton Institute’s mid 2026 Investment Outlook

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Image courtesy Franklin Templeton Institute

By Stephen Dover, CFA, Franklin Templeton Institute

(Sponsor Blog)

Executive Summary

• Resilience is the key theme for 2026. Markets and economies have held up well despite geopolitical shocks, policy uncertainty and rising inflation. Global growth remains close to trend, supported by consumer spending, business investment, productivity gains and strong corporate profits.
• We expect investment opportunities to broaden across global equity markets, while corporate credit markets should remain stable. Strong earnings in the United States and emerging markets will support a wider set of opportunities across regions and sectors. • Tighter monetary policy should keep bond yields high and yield curves flat, creating opportunities to earn income. We favor US high-yield credit, select emerging market debt — especially in Latin America — and municipal bonds for US taxpayers.
• Long-term themes remain compelling. Artificial intelligence (AI) is driving demand for energy, infrastructure and broader economic change; rising investment in defense, national security and energy infrastructure create long-term potential return opportunities. Aging populations will require investment in labor-saving technologies, assisted living and health care innovation.
• In private markets and alternatives, secondaries, private credit, real estate and infrastructure offer attractive opportunities.
• Risk to the view. Geopolitical conflict, inflation and a stronger central bank response remain key risks for investors to watch in the second half of 2026.

Introduction

Global Investment Outlook: 2026 and Beyond was built around three cyclical themes — broadening, steepening, and weakening — and three longer-term forces shaping investor portfolios: intelligence, private markets and big government.

Midway through 2026, we think that framework still provides a useful starting point, but the balance of risks has changed. Broadening remains firmly intact, supported by resilient economic growth, strong earnings and improving opportunities across regions and asset classes. But steepening of yield curves has given way to higher-for-longer yields, reflecting higher inflation and tighter monetary policies. Higher yields, however, also offer improved income opportunities in shorter-duration holdings, including US high yield and select emerging markets.

Meanwhile, the US dollar has firmed and is likely to remain rangebound rather than weak over the remainder of 2026. Most importantly, the world did not break. Despite war, tariffs, inflation, tighter policy and geopolitical fragmentation, the global economy and financial markets have held together better than many expected. This update therefore reframes the outlook around a single organizing idea: resilience: both the resilience already evident in economies and markets, and the resilience investors may need to build into portfolios for the remainder of the year.

A more Resilient Outlook (or Resilience in Markets and Portfolios)

The rest of this outlook is organized around one central idea: resilience. The phrase “the world didn’t break” is not meant to suggest that risks have disappeared or that the outlook is free of strain. Rather, it captures the defining surprise of 2026 so far: economies, markets, companies and investors have absorbed a series of shocks without a sustained breakdown in growth, earnings, credit or global trade.
The first sections explain why the global economy and financial markets have held up better than many expected, despite 18 months of geopolitical turbulence, tariffs, war, elections and rising inflation. They also show how resilience has been supported by solid economic growth and strong corporate profits growth across sectors and regions.
From there, we translate resilience into investment implications for equities, fixed income, private markets and alternatives. We also identify key long-term (thematic) opportunities. In all dimensions, we focus on where resilience is apparent and where it can create opportunities for investors in the second half of 2026.

This year, the global economy has demonstrated remarkable resilience in the face of numerous challenges, including geopolitical tensions, trade disputes, fiscal pressures, rising inflation and a sharp re-pricing of central bank policy responses.

Globally, wealth effects and favorable financial conditions have also supported consumption and capital expenditures.
Notably, trade has held up better than many feared following the introduction of high US tariffs in 2025. Global commerce has continued to expand, with important contributions from services.

China’s economy has also demonstrated notable resilience in 2026 despite ongoing challenges from a weak property sector, geopolitical tensions and trade frictions with the United States. The diversification of China’s growth drivers has been a key factor. Strong investment in advanced manufacturing, technology, renewable energy, electric vehicles, batteries and AI has helped offset weakness in real estate. These sectors have benefited from both government support as well as from strong domestic and international demand.

China’s exports have also remained more robust than many expected. Chinese firms have adapted to changing trade patterns by expanding into emerging markets, strengthening supply chains and increasing exports of higher-value-added products. As a result, China has maintained a significant role in global manufacturing and trade despite rising protectionist pressures. Continue Reading…