Insight Investment

“Against this backdrop, the current equilibrium looks fragile. It wouldn’t take much for either side of the balance to shift meaningfully, and the resulting upset could be abrupt.”

The global economy has entered what increasingly looks like an unstable equilibrium – a delicate balance between powerful tailwinds and equally powerful risks. AI‑driven investment is accelerating growth and supporting market confidence, yet debt dynamics, policy uncertainty, and shifting global capital flows are stretching the system in new and unpredictable ways.

This equilibrium will not last forever

That is why we remain cautious about deploying risk aggressively at this stage. Maintaining some dry powder gives us flexibility, and prioritising relative‑value opportunities over large directional positions feels like the more prudent approach until the underlying forces resolve themselves more clearly.

Government bonds: Opportunity in the tension

Long‑term yields are being pulled higher by relentless supply and strained fiscal outlooks, even as issuance patterns shift. Add in diverging central‑bank cycles, and we believe 2026 may be a year where relative‑value value strategies could be best placed to add value in fixed income markets.

Credit markets: Keep it simple, build resilience and seek out value

AI investment is driving a surge in issuance that will reshape global credit indices. This presents opportunity, but AI will also result in winners and losers, making active credit analysis critical. Flat credit curves and spreads near 20‑year lows means building resilience into investment strategies matters more than ever.

The US dollar: Formidable advantages but clear vulnerabilities

Structurally dominant, yet cyclically vulnerable, the dollar is stuck in its own unstable equilibrium. Growth, geopolitics and capital flows could break the range decisively.