In an age of relentless market noise, true investment foresight demands discipline, depth, and collaboration. At Julius Baer, we anchor our long-term strategy in one foundational exercise — the annual Secular Outlook. Far more than a forecast, it is a rigorous synthesis of ideas drawn from across our global investment platform. Led by Group Chief Investment Officer Yves Bonzon, the process brings together strategists, economists, asset class experts, and regional specialists — enriched by external insights and ongoing client engagement — to identify the structural forces shaping the decade:

Six capital market trends driving the markets in 2026 and beyond

Trend 1: Shifting from G7 government bonds to private balance sheets

Fundamentally, investing is about participating in the financing of the private and public balance sheets that form the backbone of a market economy. There is a high degree of interconnectedness among these balance sheets – not least because one agent’s liability is always another agent’s asset. Successful investing, therefore, requires a solid understanding of both the health of, and the dynamics between, balance sheets in the system. The US private sector has emerged significantly stronger after a decade of sustained deleveraging following the Global Financial Crisis. US households and corporate balance sheets are therefore in considerably better shape today, with household net wealth doubling since 2007 and corporates – particularly large-cap US equities – also benefitting from strong cash positions and long-term fixed debt structures.

By contrast, public sector balance sheets have weakened considerably over the same period. Persistent procyclical US government deficits, coupled with normalised interest rates, have caused the cost of servicing US debt to skyrocket since the Fed began raising interest rates in March 2022. Today, the US has reached a tipping point where it spends more on interest payments on its federal debt than on defence. Efforts to reduce the federal deficit have been modest, and globally, rising rates are hurting public finances far more than private ones. Given that fiscal consolidation is politically sensitive, if not suicidal, and growth strategies offer no guarantee of success, controlled inflation and the monetisation of government debt with the result of fiat debasement appear to be the most promising policy options. The anticipation of repressive measures by governments, such as targeting interest rates to ensure the smooth functioning of the refinancing of public debt, provides an incentive for investors to diversify away from government bonds and structurally shift capital from public balance sheets to private ones.

Trend 2: Prudent diversification amid continued US tech leadership is the name of the game

US technology companies remain at the forefront of shareholder value creation during the current innovation super cycle. However, while the benefits of artificial intelligence (AI) tools affect companies worldwide, the downside risk if the capital expenditures (capex) cycle implodes are highly concentrated in the US. Historically, USD bull cycles have coincided with US equity outperformance, while USD bear cycles have favoured non-US assets. Despite recurring debates over the dollar’s reserve currency status, no credible alternative has emerged. Recent policy shifts aimed at rebalancing the global trade system have weakened the USD without undermining US assets, as equities continue to attract international capital. This dynamic reinforces the dollar’s resilience, as long as international investors continue to channel their dollars back into US equities.

Against this backdrop, the question remains whether the major US technology companies will be able to extend their market leadership during this era of accelerated innovation. The AI boom has been characterised by capital-intensive models, fuelling debates over future profitability and bubble risks. As Howard Marks, co-founder and co-chair of Oaktree Capital Management, has observed, valuations alone rarely settle this debate. Rather, it is shifts in corporate and investor behaviour that offer better indicators on tipping points. We believe, it is not the time to underweight major US technology stocks and believe non-US investors should continue to focus their US equity exposure on truly exceptional franchises, i.e. those that cannot be found in other developed markets, and diversify wherever possible. 

Trend 3: Europe's fiscal pivot sparks a value revival

Europe’s secular stagnation has long been treated as a foregone conclusion in recent economic history. However, the most significant fiscal policy shift occurred on the Old Continent, where Germany’s reversal on both fiscal and defence policy has rekindled confidence in the continent’s ability to revitalise its industrial base and avoid fading into economic irrelevance. Germany’s “fiscal bazooka” and the overhaul of its debt break, combined with the EU’s commitment to EUR 1 trillion in defence spending, is signalling a decisive break from the past: Europe abandons fiscal orthodoxy.

Since the Covid-19 crash, European value equities – led by banks – have outperformed growth peers. While political fragility and ageing infrastructure remain caveats, the starting point is compelling.

Trend 4: India and China stand out in the emerging market equity universe

As the US exceptionalism approaches a critical juncture, global diversification has regained investor interest. Countries like India and China are particularly well-positioned to benefit from long-term structural tailwinds, and remain our preferred strategic choices across the emerging market equity universe. In India’s case the secular growth potential – driven by favourable demographics, a growing middle class, rising GDP per capita levels, and a strong domestic consumption, which accounts for nearly 60% of GDP – stands out. Unlike most other emerging market economies, which tend to be export-driven, India is somewhat insulated from the global economic cycle, making Indian equities a valuable complement to developed-market stocks. 

Trend 5: Increased demand for out-of-system assets like gold & digital assets

The appeal of out-of-system assets, those lying outside the centralised financial system, continues to grow, as evidenced by gold’s rise to the top of the asset class performance rankings for a second consecutive year. 

Unlike previous episodes of gold strength, most of its traditional drivers such as lower US real interest rates and heightened investor risk aversion have been largely absent, signalling a new investment regime. Two structural forces underpin this trend: weak government balance sheets and the increasing instrumentalisation of the centralised financial system by Western governments for sanctioning purposes. Non-Western capital pools, including central banks, are reallocating into assets immune to Western control, fuelling demand for precious metals, led by gold, as well as digital assets. When investors grow more concerned about the return of their capital rather than the return on their capital, the premium required to hold out-of-system assets shrinks.

Trend 6: Swiss assets – a store of value

In a multipolar world, Swiss assets – anchored by the safe-haven CHF – offer investors store-of-value protection and enhanced diversification. Switzerland combines stable institutions and governance, protecting shareholder rights, with a competitive, innovation-driven economy, ranking 20^th globally in nominal GDP and among the top five in GDP per capita, while also maintaining one of the lowest public debt levels worldwide. 

These attributes reinforce the CHF’s safe-haven status and support its long-term appreciation, a key advantage for foreign investors, especially those based in emerging markets where currencies tend to be more volatile. For these investors, the CHF offers additional protection against capital erosion caused by inflation. Swiss real estate and equities, as real assets, serve as an even more effective hedge against inflation.

Frequently asked questions

1.  Which investment trends are relevant from 2026 onward?

Six major trends are redefining global markets:

1. A shift from government to corporate bonds, as investors anticipate repressive measures by governments to manage debt-servicing costs, controlled inflation, and fiat debasement;
2. US tech dominance continues, driven by AI capex, but depends on successfully monetising these investments;
3. Europe’s fiscal revival, led by Germany’s spending surge and EU defence commitments, ideally positions value stocks to benefit;
4. Emerging markets diversification, with India and China offering strong structural growth signals despite challenges;
5. Growing demand for gold, fuelled by non-Western investors seeking assets outside Western-controlled financial systems;
6. Increased appeal of Swiss assets, as the CHF, Swiss equities, and real estate offer stability and inflation protection in a fragmented world.

2. What role do government bonds play in portfolios going forward?

Governments are running large deficits and facing higher interest rates, making their debt harder to manage. Cutting spending or raising taxes to fix this is politically difficult, and there’s little guarantee faster growth will solve the problem. Because of this, many governments may choose to tolerate higher inflation or print money to reduce the real value of their debt — a move that slowly erodes the value of cash and fixed-income investments like government bonds.

In this environment we expect investors to increasingly shift out of government bonds to finance private balance sheets — such as stocks and corporate bonds — that have better potential to grow and protect wealth over time. 

3. Will US technology continue to outperform the rest of the world?

Since the AI boom took off, US technology giants have morphed from capital-light to capital-intensive business models.  With soaring capex and rising equity valuations, investors are wondering whether a bubble is forming. While market conditions are getting challenging, we believe we are not the tipping point of the US-led bull market, driven by the AI cycle. It is likely not the time to underweight major US technology stocks, especially given their profitability and the strength of their franchises, even if their contribution to the outperformance of the US market is likely to be more challenging in the future.

4. Has gold peaked out?

Gold’s remarkable ascent in recent years – while also subject to some speculative demand – is fundamentally supported by structural demand for physically backed gold financial instruments, particularly from non-Western central banks. Given that the Western governments are demonstrating a healthy appetite for using capital markets for confiscation or sanctioning purposes, we must work with the hypothesis of increased structural demand for out-of-system assets.