Voya Investment Management (Voya IM) has decided to exit the U.S. offshore market. The firm, active in this segment through its alliance with AllianzGI since June 2022, will therefore cease distribution of the European manager’s UCITS funds. However, the global distribution agreement for other markets remains in place, meaning AllianzGI will continue to sell Voya IM’s strategies outside the U.S. market.
“AllianzGI and Voya IM jointly agreed, following a comprehensive review of their offshore distribution business, to transfer commercial coverage of Luxembourg-domiciled vehicles to AllianzGI. This decision is based on the domicile of the strategies offered, as well as increasing regulatory complexity, and is in the best interest of the clients we serve. AllianzGI and Voya IM are confident that this new approach will strengthen our successful alliance by ensuring a smoother and more seamless operating model for our distribution partners. All other terms and conditions governing the alliance between AllianzGI and Voya IM remain fully in effect,” explained Voya IM.
The alliance between Voya IM and AllianzGI is a global strategic agreement that began over three years ago, allowing AllianzGI to expand the range of U.S.-managed investment strategies available to clients worldwide. Additionally, as part of the agreement, AllianzGI transferred part of its U.S. business and, in return for the asset transfer, Allianz Group received a 24% stake in the expanded U.S. asset manager Voya IM.
The U.S. asset management market is at a turning point. Retail client channels continue to gain ground and are once again approaching parity with the institutional channel, following several years of adjustments marked by market volatility.
According to the report The State of U.S. Retail and Institutional Asset Management 2025, published by Cerulli, professionally managed assets in the United States have reached $73.7 trillion, a historic high. Of that total, $36.6 trillion corresponds to retail channels, while the institutional channel holds $37.1 trillion, reflecting an increasingly balanced distribution between both segments.
The retail channel briefly surpassed institutional in market share during 2020 and 2021, before retreating in 2022 due to the sharp correction in equity markets. However, that setback proved temporary. Since then, retail channels have returned to a growth trajectory and are once again nearing the 50% share threshold.
“The significant decline in assets during the 2022 market correction negatively impacted the three- and five-year compound annual growth rates of the retail channel compared to the institutional one,” explained Brendan Powers, director at Cerulli. Nonetheless, the rebound recorded in 2024 marks, according to the analyst, a return to the long-term growth trends that have historically favored the retail segment. In this context, Cerulli anticipates the momentum will continue, driven by pension risk transfers in corporate defined benefit (DB) plans and the migration of assets from defined contribution (DC) plans into IRA accounts.
Beyond the aggregate market evolution, the report highlights the growing importance of intermediaries in reshaping distribution strategies. On the institutional side, Outsourced Chief Investment Officers (OCIOs) continue to consolidate their role as key players. Assets managed by OCIOs in the United States reached $3.3 trillion by the end of 2024, having tripled in less than a decade. While new client acquisition will remain a growth driver, Cerulli notes that replacement mandates are beginning to gain traction in an industry entering a more mature phase.
At the same time, RIA channels are strengthening their role within asset managers’ retail distribution strategies. The strong growth of independent and hybrid channels, driven by advisor movement and active M&A activity, has resulted in a total of $5.9 trillion in professionally managed assets. As M&A transactions, supported by private equity and aggregators, continue to advance, a small group of large firms is beginning to concentrate the majority of assets in the RIA space.
The report also underscores the growing diversification of investment vehicles available to both retail and institutional investors. In the institutional segment, demand typically begins with separately managed accounts but extends to private funds and mutual funds, particularly among smaller institutions or in asset classes with higher operational complexity. In the DC plan space, Collective Investment Trusts (CITs) have become an essential standard.
In retail channels, ETFs and separately managed accounts (SMAs) are gaining prominence, while asset managers expand their offerings of illiquid alternative structures, such as private funds or interval funds, with the aim of facilitating high-net-worth investors’ access to private market strategies.
With the final figures from the 2025 balance now in, there’s no doubt that last year marked a milestone in Mexico’s investment landscape: quite simply, it was the best year in the country’s modern history for investments in Mexican pesos.
From metals to real estate investments, and not to mention the strength of the local currency, Mexico’s investment market experienced a boom that surprised both insiders and observers alike, with the numbers making a compelling case.
According to data from Franklin Templeton México’s final report, the most profitable investment in the Mexican market during 2025 was gold, delivering a 43% return in pesos. This was driven by global political and tariff-related uncertainty, as well as a shift in global investors’ perception of the dollar as an effective “safe haven,” they noted.
Looking specifically at Mexican assets, the figures were equally remarkable for a period marked by high volatility. Fibras (real estate investment vehicles) posted a 38% return—something never seen before. Meanwhile, Mexican equities delivered an average return of 35%, boosted by the fact that the pessimistic scenarios forecast at the start of the year failed to materialize.
Fixed income also had an exceptional year. “Long-term Mexican government bonds were a surprise: Banxico’s aggressive rate cuts started to pay off, making Udibonos post their best year ever and MBonos their third-best year,” said Franklin Templeton strategists in their report.
Carry Trade, a Decisive Factor
While the fact that many negative scenarios did not play out was crucial to this historic investment year in Mexico, the presence of the carry trade phenomenon must also be highlighted as key to the recorded boom, since it’s not something that occurs at all times.
The dollar’s weakness, its worst performance on record against the Mexican peso, was a major driver of this arbitrage dynamic in Mexican markets. This weakness stemmed more from global performance in response to U.S. government tariff policies and geopolitical factors than from anything specific to the local economy.
This scenario favored strategies such as borrowing in Japanese yen at near-zero interest rates to invest in Mexican pesos at much higher yields, undoubtedly contributing to the peso’s continued appreciation.
What Lies Ahead for 2026
Analysts generally expect Mexican markets to continue on a positive path in 2026, though with less “explosive” results than those seen last year.
Moreover, the key challenges for the local economy are clearly outlined, with the renegotiation of the USMCA in the second half of the year posing the highest risk. According to Franklin Templeton analysts, “the proximity and historic economic integration between the United States and Mexico should outweigh political differences.”
They also expect the nearshoring narrative to regain momentum in 2026, benefiting industrial sectors listed on capital markets.
As for Mexico’s long-term debt, it is likely to continue offering attractive returns for patient investors, with rates that remain high both historically and compared to other investment-grade countries. However, short-term Mexican debt is expected to continue underperforming due to Banxico’s aggressive rate cuts and the increase in provisional income tax, according to the firm’s outlook.
The digital asset market is undergoing a new stage of maturation that is beginning to change the way private banks and high-net-worth investors evaluate its potential as an asset class. Far from the extreme fragmentation that characterized previous cycles, liquidity is now concentrating in a small group of crypto assets, giving rise to an “upper tier” that is beginning to show characteristics of a more stable and accessible market for professional investors.
This is according to the OTC Markets 2025 report, prepared by Wintermute, one of the leading market makers in the crypto ecosystem, which analyzes the evolution of OTC activity and institutional flows.
The study highlights that a growing share of traded volume is concentrated in large-cap digital assets, while the relative weight of smaller, less liquid tokens is declining.
For private banking, this consolidation process is crucial. Greater liquidity concentration improves execution conditions, reduces price impact, and brings greater predictability, key elements for including digital assets in portfolios managed under stricter risk criteria.
In this context, the report suggests that the crypto market is beginning to show a clearer distinction between potentially investable assets and a more speculative universe.
The study emphasizes the growing role of OTC trading as the preferred channel for institutional investors and high-net-worth individuals. Unlike traditional exchanges, the OTC market allows for large-size orders to be handled with lower friction and greater discretion, features especially valued by private banks and family offices.
According to Wintermute, the profile of participants in this segment has become more professional, with increasing demand for solutions tailored to institutional standards.
Another key point is that this consolidation does not imply a homogeneous expansion of the crypto market as a whole, but rather a more pronounced hierarchy. In practice, this forces wealth managers to adopt a more selective approach—focusing on assets with sufficient market depth, robust infrastructure, and greater acceptance among institutional investors.
In this scenario, the inclusion of crypto assets in private banking portfolios is no longer merely opportunistic but is becoming part of a broader conversation about diversification, correlations, and strategic allocation. The report suggests that the shift toward a more mature market structure could lay the groundwork for gradual adoption, always contingent on clear regulatory frameworks and proper risk management.
History suggests major dollar sell-offs tend to occur in consecutive years. This is the conclusion reached by Bank of America after analyzing the behavior of the U.S. dollar since the 1980s. Looking ahead to this year, the institution argues that the closest historical analogues point to an additional 8% decline in the Dollar Index (DXY Index) in 2026.
“2018 was the exception, but it coincided with Fed rate hikes, the trade war, and weak European growth. For now, the dollar remains in broad downward trends against G10 currencies. The fact that global equities are outperforming U.S. equities at the start of 2026 warrants attention,” they argue.
Reference to 1995
Focusing on the dollar’s decline in 2025, the institution explains that in the main historical analogues with the highest correlation to last year’s dollar movements, the dollar’s weakness continued the following year in four out of five cases. “The average of the five best analogues would imply an additional -8% drop in the dollar in 2026. Among these analogues, 1995 may be the most relevant for 2026, as it also featured a soft landing of the U.S. economy driven by technology and Fed rate cuts in the second half of the year. The dollar weakened by -4.2% in 1995, close to our forecast that the DXY index will fall toward the 95 level in 2026,” the report notes.
They also highlight that 2018 was an unusual year in which the dollar reversed its 2017 losses and rose by 4.7% due to Fed rate hikes, headlines surrounding the U.S., China trade war, and a weak eurozone economy. According to their analysis, despite a moderate rebound toward the end of 2025, the dollar remains in broad downward trends against G10 currencies. “Global equity markets also began 2026 outperforming the U.S. This factor deserves attention, as equity flows and hedging could become a clearly bearish trigger for the dollar in 2026,” they add.
Years “Similar” to 2025
The dollar fell by 9.4% in 2025 against G10 currencies, according to the DXY index, making it the second-largest annual dollar decline in the past two decades. In identifying the historical years most closely correlated with the dollar’s performance in 2025 and drawing possible implications for 2026, the institution highlights 2005, 1995, and 1975.
Since 1975, the five closest historical analogues have shown an average correlation of 81% with the dollar’s performance in 2025, the report states.
In those five years, the dollar weakened by an average of 10.5%, with most of the decline concentrated in the first half of the year, similar to what occurred in 2025. And in all five historical analogues, the dollar continued to fall the following year, with the sole exception of 2018. On average, the dollar recorded a further 8.3% drop in the subsequent year.
The report also argues that 1995 may be the most relevant analogue for 2026 among the DXY’s imperfect historical comparisons. According to the bank’s analysis, tech-driven growth helped the U.S. economy achieve a soft landing instead of a recession. Additionally, the Fed began cutting rates in the second half of 1995, even though inflation was closer to 3% than 2%.
In light of these findings, the conclusion is that large dollar sell-offs rarely happen in isolation: “This bearish quantitative outcome supports our base case for currencies in 2026, where we expect further dollar weakness due to interest rate convergence between the U.S. and the rest of the world post-Powell, stimulus in the eurozone and China, and increased currency hedging on dollar-denominated assets.”
Outlook for 2026
Looking ahead, Bank of America expects the U.S. economy to struggle after a temporary setback in Q4 2025 caused by the government shutdown, and sees the Fed continuing to cut rates after midyear. Under this scenario, the 1995 analogue alone would imply a further 4.2% decline in the dollar, closely in line with the bank’s forecast for the DXY to fall toward the 95 level in 2026.
Another key observation is that divergence in equity markets could prolong the dollar’s downward trend in 2026. “Although U.S. stock markets reached new all-time highs at the start of 2026, their performance has lagged most global equity markets. With global central bank easing cycles nearing their end, the FX regime is gradually shifting from being almost entirely rate-driven, as it was between 2022 and 2024, to being more influenced by equities. The relative performance of equity markets across countries should be watched closely, as continued divergence like we’ve seen so far in 2026 could become a major bearish driver for the dollar,” the Bank of America report concludes.
Photo courtesyLarrainVial’s Distribution Team for the US Offshore Market
LarrainVial (LV) becomes the largest Third-Party Distributor in Latin America and the US Offshore Channel
According to the firm, this leadership position has been reinforced by the expansion of its long-standing distribution alliance with Invesco, which now extends to the US Offshore market.
For more than 18 years, Invesco has collaborated with LV in distribution throughout Latin America. Currently, LV manages 9.2 billion dollars in UCITS mutual funds and 15.6 billion dollars in Invesco ETFs, “a track record that underscores the depth and strength of this relationship,” they stated. The alliance will now extend to the US Offshore channel for Invesco’s UCITS products, leveraging LV’s proven expertise and scale to replicate this success.
Sales efforts in the US Offshore market will be led by María Elena Isaza and Julieta Henke, Managing Directors and Co-Heads of Sales for LV’s US Offshore Distribution, who will continue to lead Robeco’s commercial initiatives under LV’s multi-firm distribution model.
According to the firm, Alejandra Saldías will join the team and play a key role in designing the ETF sales strategy as Head of ETF Sales Latam and US Offshore, ensuring that LV’s strong ETF track record in Latin America translates into meaningful growth in the US Offshore market. Additionally, Robert (Rhett) Baughan, Jr. will continue as Head of U.S. Offshore Distribution at Invesco, working closely with the LV team to strengthen client relationships and expand reach.
Following this announcement, Andrés Bulnes, Partner and Global Head of Distribution at LarrainVial, commented: “For more than 90 years, LarrainVial has earned the trust of clients throughout the region. Deepening our alliance with Invesco reinforces our shared vision of delivering exceptional service and innovative solutions. Together, we are well positioned to support clients in the U.S. Offshore market with top-tier investment opportunities.”
US Offshore Market
By joining forces, LV brings distribution capability, scale, and a dedicated team, significantly strengthening its presence and reach in the U.S. Offshore market. This development benefits the entire ecosystem and positions LV as the leading third-party distributor in the U.S. Offshore segment, enabling deeper client relationships, greater share of wallet, and more effective communication.
LV US Offshore currently represents Robeco, Invesco, Brown Advisory, PineBridge, and LarrainVial Asset Management, with a team composed of María Elena Isaza, Julieta Henke, and Cala Aguiar (Robeco and Invesco), and Matías Paulsen, Isabel Bachelet, and Paulina Esposito (Brown Advisory, PineBridge, LV Asset Management).
Founded in 1934 in Chile, LarrainVial has evolved over nine decades, transitioning from an equities firm to a comprehensive financial institution with operations in Chile, Peru, Colombia, Mexico, Uruguay, Argentina, Panama, and the United States. Our more than 900 collaborators across eight countries are led by 27 executive partners, and since 2010, we have operated as a registered broker-dealer in the United States under the supervision of FINRA/SEC. Across all its business lines, LV manages 65 billion dollars in assets under management (AUM), with Third-Party Distribution being a core pillar (53 billion dollars under distribution).
A new analysis by Ocorian, specialists in asset services for private markets and corporate and fiduciary administration, reveals that assets in infrastructure funds have reached a record high of $1.35 billion. Their value has more than doubled since 2020, when it stood at $652 billion, and has grown 10% since December 2024, according to the latest Global Asset Monitor from Ocorian.
The firm projects a further 70% increase by 2030, which would bring total assets in global infrastructure funds to $2.3 trillion.
The analysis shows that nearly half (47%) of the underlying assets in infrastructure funds are located in North America, while two-fifths are in Europe. Europe is nearing North America in terms of fund domicile, and Asia-based funds represent about one-sixth of the total.
“Infrastructure investment AUM has grown 10% this year, reaching $1.35 trillion. AI infrastructure, the energy transition, and decarbonization are key drivers of this growth, showing that investors are committing long-term capital to critical sectors and assets that support real economic resilience and sustained returns,” says Yegor Lanovenko, Global Co-Head of Fund Services at Ocorian.
“At Ocorian, we support alternative asset managers in navigating operational and regulatory complexity across the entire investment lifecycle, especially where operational scale makes a difference and investor needs and profiles are rapidly evolving across asset classes,” Lanovenko concludes.
Napoleón Lazardi, founder and CEO of Pitagora Capital & Consulting, knows firsthand what it means to leave Venezuela and rebuild from scratch abroad. Born in the land of arepas and having lived outside the country for over a decade, his personal journey, which took him through Europe and Latin America before establishing himself in the world of financial analysis and technology, shapes his view on how an extreme political shock might affect markets and, especially, Venezuelan capital currently held offshore.
For Lazardi, the recent arrest of Nicolás Maduro should be seen less as an immediate turning point and more as an exogenous risk shock. “The market doesn’t change the final value of the bond; what changes is the probability of default and its distribution over time,” he explains, referring to the sovereign bonds of his home country. In a context where Venezuelan bonds trade outside formal markets, with low volume and blurred pricing references, such events trigger abrupt reactions, curve distortions, and short-term panic.
From a technical perspective, the Pitagora Capital CEO underscores that Venezuela’s market is currently unprepared to absorb such shocks without amplifying volatility. “There’s a collapse in the pricing system and a redistribution of risk toward the short term. That doesn’t mean value disappears, it just shifts over time,” he notes, drawing on probabilistic models he developed through his experience in emerging markets like Argentina, where he once lived.
Still, the focus extends beyond bonds. One of the major unknowns is what might happen to the Venezuelan capital that left the country in recent years. With a diaspora estimated at nearly eight million people, Lazardi is blunt: a massive repatriation of capital is not an immediate scenario.
“Venezuelan capital doesn’t return quickly or automatically. Much of those assets are already structured offshore, primarily in the United States, and follow wealth preservation logics, not short-term opportunism,” he states.
Even in the event of a profound political shift or greater international involvement, the analyst warns that several often-overlooked factors remain: legal timelines, litigation processes, lack of infrastructure, and the real capacity for reinvestment. By his estimates, Venezuela would need around $180 billion and deep structural reforms to rebuild its productive base, particularly in the energy sector, which has seen nearly two decades without sustained investment.
“Production doesn’t recover overnight. The market knows this, which is why it prices in risk even under more open scenarios,” he explains. In that sense, U.S. presence or backing alone does not guarantee a swift normalization of investment flows.
Paradoxically, Lazardi acknowledges that Venezuela is currently a country full of potential opportunities. Energy, tourism, transport, and financial services stand out as attractive sectors in the long term. But the starting point is extremely low. “The technological infrastructure is destroyed. The foundation needed to support a modern development process simply doesn’t exist today,” he warns.
For Venezuelan capital abroad, from family savings to more sophisticated portfolios, the message is clear: the return will depend less on a one-off political event and more on the institutional, legal, and technological reconstruction of the country. “The market isn’t pricing in certainties; it’s pricing in probabilities,” Lazardi concludes. And for now, those probabilities remain steeped in uncertainty.
It seems the Trump administration intends to make the final months of Jerome Powell’s tenure at the Federal Reserve more difficult. Over the weekend, the Department of Justice launched a criminal investigation into the Federal Reserve (Fed) over the renovation of the central bank’s headquarters. Jerome Powell, its chairman, views this as a pretext to escalate pressure on the Fed, as President Trump remains dissatisfied with monetary policy, putting the central bank’s independence at risk.
How Have Markets Responded to This Latest Episode?
According to experts, as in previous cases, the Fed’s lack of independence doesn’t go unnoticed, and markets don’t like it. “The global financial ecosystem has entered a phase of systemic volatility and power realignment reminiscent of periods of intense geopolitical friction in the 20th century. The convergence of an institutional crisis at the heart of the Federal Reserve, an aggressive resource-grabbing policy in the Southern Hemisphere, and escalating tensions in the Arctic and Middle East has fractured the stability narrative that dominated the end of last year,” says Felipe Mendoza, CEO of IMB Capital Quants.
Jon Butcher, Senior U.S. Economist at Aberdeen, notes that the initial market reaction appears negative, with rising risks that a devaluation could weigh on the U.S. dollar, equities, and bonds. In particular, he warns, “the long end of the curve could see an increase in term premiums.” In his view, this also raises questions about the composition of the Fed’s Board of Governors. “A new chair is expected to be appointed this month, likely filling the seat of Stephen Miran, whose term ends on January 31. However, Republican Senator Thom Tillis has stated he will oppose any Fed nomination until this legal matter is fully resolved,” Butcher explains.
Powell’s term as a governor runs through 2028, and he had been expected to step down once his term as chair ends in May. However, his recent statement raises questions about whether he will remain on the Board to defend the Fed’s independence despite legal risks. “Regardless of whether this legal action has merit, it signals the administration’s willingness to continue pressuring the Fed to adopt a more accommodative monetary policy. Given that President Donald Trump is also considering fiscal measures that would widen the deficit, we expect growing concerns over fiscal dominance and the external risk of yield curve control,” Butcher adds.
The Question of Independence
Paul Donovan, Chief Economist at UBS Global Wealth Management, believes that if the move is aimed at weakening the Fed’s independence, it could backfire on the administration. He speculates that Powell now has “less incentive to resign as a Fed governor, given the publicly defiant stance he has taken against this criminal investigation.”
“Trump doesn’t directly appoint the next Fed chair—he only nominates the candidate,” he continues. “That candidate must either be a sitting governor or fill a board vacancy. The Senate must confirm the next Fed chair, and that process could become more complicated if this situation is seen as a direct attack on the central bank’s independence.”
Donovan outlines a more extreme scenario, suggesting that if a future interest rate decision is particularly close, “these explicit attacks on central bank independence could push FOMC members toward a more hawkish stance as a show of autonomy.” In fact, he argues, based on market reactions, that may be the safest response from a bond market perspective. “The need to underline independence could become a key factor in rate-setting, both institutionally and in terms of market consequences,” he emphasizes.
The Gold Market Narrative
For Carsten Menke, Head of Next Generation Research at Julius Baer, it’s clear that concerns over the Fed’s independence are being reflected in the commodities market. “Gold and silver reacted positively to the news, rising 1.5% and 5% respectively in early Monday trading. We see increased interference in the Fed as a clearly bullish wildcard for precious metals in 2026. While silver is expected to respond more strongly to such concerns, we still believe its outperformance relative to gold has become excessive,” says Menke.
He concludes that, although the U.S. dollar is also weakening, the reaction in precious metals markets, especially silver, seems somewhat disproportionate. For Menke, growing interference with the Fed and doubts about its independence are among the main bullish wildcards for precious metals in 2026. “With Powell’s expected departure in May, the future of the Fed’s independence will hinge on whether his successor acts independently or aligns closely with the administration. Ongoing concerns over the Fed’s independence and the U.S. dollar’s status as the world’s reserve currency could drive more safe-haven investment into gold and silver, pushing prices even higher than current levels,” he adds.
Powell Defends the Fed
In a rare statement from a central bank chair, Powell said the move represents “an unprecedented action” that should be understood “in the broader context of the administration’s threats and continued pressure.” He stated:
“This new threat has nothing to do with my June testimony or the renovation of the Federal Reserve buildings. Nor does it relate to the Congressional oversight function; the Fed, through testimony and other public disclosures, has made every effort to keep Congress informed about the renovation project. These are pretexts. The threat of criminal charges stems from the Federal Reserve setting interest rates based on our best judgment of what serves the public interest, rather than following the President’s preferences. The real issue is whether the Fed will continue to set interest rates based on evidence and economic conditions, or whether monetary policy will be dictated by political pressure or intimidation.”
To help restore confidence in the monetary institution, he added that throughout his service under four different administrations, he has performed his duties without fear or political favoritism, focusing solely on the Fed’s dual mandate of price stability and maximum employment.
“Public service sometimes requires standing firm in the face of threats. I will continue to do the job the Senate confirmed me to do, with integrity and a commitment to serve the American people,” Powell concluded in his statement.
The global bull market could continue in 2026, supported by growth in corporate earnings and resilient economic activity, although equity gains are unlikely to match the strong advance seen in 2025, according to Goldman Sachs Research. The firm expects continued global economic expansion across all regions and further moderate rate cuts by the U.S. Federal Reserve.
“Given this macroeconomic backdrop, it would be unusual to see a significant equity pullback or a bear market without a recession, even starting from elevated valuations,” writes Peter Oppenheimer, Chief Global Equity Strategist at Goldman Sachs Research, in the report Global Equity Strategy 2026 Outlook: Tech Tonic—A Broadening Bull Market.
Looking back, diversification was a central theme for Goldman Sachs Research last year. “Investors who diversified across regions in 2025 were rewarded for the first time in many years, and analysts expect diversification to continue in 2026, extending to investment factors such as growth and value, as well as across different sectors,” they explain.
Outlook for Global Equities in 2026
“We believe that returns in 2026 will be driven more by earnings growth than by rising valuations,” says Oppenheimer. The 12-month global forecast suggests that stock prices, weighted by regional market capitalization, could rise by 9% and deliver a total return of 11% including dividends, in U.S. dollars. “Most of these returns are driven by earnings,” he adds. Commodity indexes could also advance this year, with gains in precious metals once again offsetting declines in energy, as was the case in 2025, according to Goldman Sachs.
Diversification and Market Cycle
Oppenheimer’s team analyzes the typical phases of market cycles: despair during bear markets, a brief phase of hope after the initial rebound, a longer period of growth driven by rising earnings, and finally, a phase of optimism as investor confidence builds.
According to this analysis, equities are currently in the optimism phase of a cycle that began with the 2020 bear market during the pandemic. This stage is typically accompanied by rising valuations, suggesting some upside risks to baseline forecasts.
Should Investors Diversify in 2026?
Geographic diversification benefited investors in 2025, an unusual outcome, as the United States underperformed other major markets for the first time in nearly 15 years. Equity returns in Europe, China, and Asia were nearly double those of the S&P 500 in dollar terms, supported by the weakness of the U.S. currency.
While U.S. equities were driven primarily by earnings growth, especially among large tech companies, markets outside the U.S. showed a more balanced mix of improving corporate results and rising valuations. The growth-adjusted valuation gap between the U.S. and the rest of the world narrowed last year.
“We expect this convergence in growth-adjusted valuation ratios to continue in 2026, even though absolute valuations in the U.S. are likely to remain higher,” notes Oppenheimer’s team.
Diversification is expected to continue offering potential to enhance risk-adjusted returns in 2026. Investors may consider broad geographic exposure, including a greater focus on emerging markets, while combining growth and value stocks and diversifying across sectors.
Elevated Valuations and Sector Opportunities
Although equities performed strongly in 2025, outperforming both commodities and bonds, gains were not linear. The S&P 500 saw a nearly 20% correction between mid-February and April before rebounding. The sharp recovery that followed has left valuations at historically high levels across all regions, including Japan, Europe, and emerging markets.
Oppenheimer notes that non-technology sectors could perform well this year, and investors may benefit from companies that indirectly gain from capital investment by tech firms. Interest is also expected to grow in companies outside the tech sector as new capabilities related to artificial intelligence begin to materialize.
Is There a Bubble in Artificial Intelligence?
Market interest in artificial intelligence remains intense, though this does not necessarily signal a bubble. The dominance of the tech sector began after the financial crisis and has been supported by stronger-than-average earnings growth.
While the share prices of major tech companies have risen sharply, valuations are not as extreme as in past cycles, such as the peak of the tech bubble in 2000.
