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Q2 2026 Global Outlook

Pushing limits

April 17, 2026 | Mega forces like geopolitical fragmentation and AI are clashing, transforming markets and economies. The long-term outcomes from this transformation remain uncertain – but it does contain abundant investment opportunities.
Read our Q2 outlook (PDF) Read our Q2 outlook (PDF)

Investment themes

  • 01

    Micro is macro

    The capital spending ambitions tied to the AI buildout are so large that the micro is macro. Overall revenues could justify the spend – yet it’s unclear how much will accrue to the tech companies driving the buildout. We also see this as a great time for active investing.

  • 02

    Leveraging up

    The AI builders are leveraging up – investment is front-loaded while revenues are back-loaded. Along with highly indebted governments, this creates a more levered financial system vulnerable to shocks – including bond yield spikes. We see private credit and infrastructure supporting this financing.

  • 03

    Diversification mirage

    With a few mega forces driving markets, allocations made under the guise of diversification may now in fact be big active bets. We think investors should focus less on spreading risk indiscriminately and more on owning it more deliberately – a more active approach. We think portfolios require a clear plan B and a readiness to pivot quickly.

Read details of our Q2 outlook

Global Investment Outlook A thematic approach Asset class views
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Clashing mega forces

The global economy and financial markets are being transformed by mega forces – big structural shifts like the low-carbon transition or demographic divergence. With a few mega forces driving markets, it is hard to avoid making a big call on their direction – and as such, there is no neutral stance, not even exposure to broad indexes.

We’ve seen two mega forces – AI and geopolitical fragmentation – collide so far this year. The Middle East conflict delivered a supply shock, disrupting the flow of energy and other key materials like fertilizer and gas. But at the same time, “hyperscalers” – big tech companies that provide cloud computing services – are slated to spend even more than previously thought.

Both developments shift the investment outlook in different ways.

Before the conflict, markets were pricing at least two quarter-point interest rate cuts from the Federal Reserve in 2026. Soaring energy prices that may add to existing inflation pressure have dimmed hopes for easier monetary policy.

Pricing in fewer cuts
Market-implied 25-basis point rate moves in 2026

The chart shows how many 0.25% cuts or hikes markets priced in for major central banks on Feb. 27 and as of Apr. 20.

Forward-looking estimates may not come to pass. Source: BlackRock Investment Institute with data from Bloomberg, April 2026. Note: The bars show the market-implied number of 25-basis point moves by major central banks in 2026. Negative numbers represent rate cuts and positive numbers represent rate hikes.

Yet the massive capital investment from tech “hyperscalers” is seemingly unaffected by the Middle East conflict. In fact, consensus expectations of their spend has only risen since last year, with estimates out to 2030 rising about 25% since last October.

Even bigger spending
Estimated capex for tech “hyperscalers,” 2025-2030

This chart shows future spending plans for tech companies rising through time, with estimates as of April 2026 even higher than estimates made last October.

Forward-looking estimates may not come to pass. Source: BlackRock Investment Institute, with data from Bloomberg, April 2026. Note: The bars show the total estimated capex, using Bloomberg consensus, for tech “hyperscaler” companies – Alibaba, Amazon, Google, Meta, Microsoft, Oracle, Tencent – in billions of U.S. dollars.

That leads us to believe the AI mega force is accelerating. We think recent developments, including the disruption to energy supply reinforce the U.S. edge in AI. The AI theme is also powering corporate earnings upgrades in emerging market (EM) stocks too. We favor AI beneficiaries and commodity exporters.

Micro is macro

The AI buildout is dominated by a handful of companies whose spending is so large that it has a macro impact. Taking a view on these companies requires assessing whether the macro math adds up.

As AI becomes embedded in the economy, we expect it to create entirely new pools of revenue in the tech sector and beyond. Where exactly? it’s highly uncertain. But we are seeing some early signs that the massive spend on AI could pay off. The revenue growth of AI model builders is one positive development. And new efforts to generate power for AI in a way that avoids network charges could help avoid power grid constraints.

Revenue rocket
Annualized revenue, 2023-2026

This chart shows the estimated annualized revenue of Open AI and Anthropic

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results. Source: BlackRock Investment Institute with data from Epoch AI, 'Data on AI Companies'. Published online at epoch.ai. Retrieved from 'https://epoch.ai/data/ai-companies’ [online resource]. Accessed 15 Apr 2026.

Leveraging up

Bridging the AI buildout’s financing hump between front-loaded investment and back-loaded revenues needs long-term financing. That means greater overall leverage in the system is inevitable. This has already started with the AI buildout being increasingly debt funded, as seen from bond sales by large tech firms.

The good news: the starting point for private sector leverage is healthy, particularly listed tech. Yet the financing needs tied to AI capex far exceed what even the largest firms can meet internally. That’s why we expect companies to keep tapping public and private credit markets. But the ramp-up in private sector leverage comes against a backdrop of already highly leveraged public sector balance sheets. One risk: a structurally higher cost of capital raises the cost of AI-related investment with spillovers to the broader economy. A more leveraged system could create vulnerabilities to shocks. Indebted governments will have less capacity to cushion such shocks. This is where AI financing needs and government debt constraints intersect.

So far this year, net corporate debt issuance has risen little. That may explain why credit spreads have lingered near historically tight levels.

Debt detente
Outstanding debt, 2024-2026

This chart shows how the outstanding debt of global debt markets, a proxy of net issuance, has risen little to start the year.

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results. Index performance does not reflect fees or expenses, and it is not possible to invest directly in an index. Source: BlackRock Investment Institute, with data from Bloomberg, April 2026. Note: The chart shows the total amount of debt included in the Bloomberg Global Agg Corporate and Global High Yield indexes. The lines show the amount issuers are due to repay at maturity, not the current market pricing of that issued debt.

Diversification mirage

Portfolio decisions taken under the guise of “diversifying” away from the handful of forces driving markets is now a bigger active call. Our analysis finds that markets are more concentrated, with less breadth, as a larger share of U.S. equity returns reflects a single, common driver after accounting for other drivers of equity returns, like value and momentum.

Attempts to diversify away from the U.S. or AI - toward other regions or equal-weighted indexes, for example – amount to larger active calls than before. They should be recognized as big active calls that need to be made with conviction. Moreover, if the AI theme stumbles, the impact will likely dwarf any seeming diversification away from it.

Traditional diversifiers are also faltering. Long-term Treasuries no longer offer the portfolio ballast they once did as high debt keeps yields elevated. We find that pattern held during the market fallout from the Middle East conflict. Even gold provided little protection.

So this environment calls for seeking truly idiosyncratic return sources, such as private markets and hedge funds, and staying tactical.

Bonds offer little refuge post-pandemic
U.S. stock-bond correlation, 1970-2026

This chart shows the correlation between returns of U.S. Treasuries and U.S. stocks. The correlation – once consistently negative – has been more erratic in the years since the Covid-19 pandemic.

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results. Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index. Source: BlackRock Investment Institute, with data from LSEG Datastream, April 2026. Note: The line shows the rolling 90-day correlation between daily returns of the S&P 500 and U.S. 10-year Treasuries.

We think investors should focus less on spreading risk indiscriminately and more on owning it more deliberately. We lean into AI beneficiaries – but retain a tactical approach. We monitor signposts for how the AI transformation is unfolding.

Read our Q2 outlook in charts (PDF) Read our Q2 outlook in charts (PDF)

Going global

We are overweight U.S. stocks on contained damage to global growth from the Middle East conflict and strong earnings expectations – particularly in tech. We also go overweight emerging market stocks but stay selective. We stay underweight long-term U.S. Treasuries and are neutral on euro area government bonds. Market pricing of the European Central Bank’s policy path is now more in line with our view.

Big calls

Our highest conviction views on six- to 12-month (tactical) and over five-year (strategic) horizons, April 2026

  Reasons
Tactical  
Favor AI beneficiaries We favor physical infrastructure and equipment supporting the AI buildout – like semiconductors, power and data center assets – that we think stand to benefit no matter the winners or losers. We see the AI theme lifting U.S. corporate earnings, and that underpins our U.S. equity overweight.
Select international exposures We like hard-currency EM debt due to improved economic resilience, disciplined fiscal and monetary policy and a high ratio of commodities exporters. We also like EM equities, preferring commodity exporters and AI beneficiaries too. In Europe, we favor equity sectors such as infrastructure.
Evolving diversifiers We suggest looking for a “plan B” portfolio hedge as long-dated U.S. Treasuries no longer provide portfolio ballast – and to mind potential sentiment shifts. We like gold as a tactical play with idiosyncratic drivers, but we think it has become more unreliable as the diversification mirage grows.
Strategic  
Portfolio construction We favor a scenario-based approach as we learn more about AI winners and losers. We lean on private markets and hedge funds for idiosyncratic return and to anchor portfolios in mega forces.
Infrastructure equity and private credit We find infrastructure equity valuations attractive and mega forces underpinning structural demand. We still like private credit but see dispersion ahead – highlighting the importance of manager selection.
Beyond market-cap benchmarks We get granular in public markets. We favor DM government bonds outside the U.S. Within equities, we favor EM over DM yet get selective in both. In EM, we like India which sits at the intersection of mega forces. In DM, we like Japan as mild inflation and corporate reforms brighten the outlook.

Note: Views are from a U.S. dollar perspective, April 2026. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any particular funds, strategy or security.

Tactical granular views table

Six- to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, April 2026

Legend Granular

We have lengthened our tactical investment horizon back to six to 12 months. The table below reflects this and, importantly, leaves aside the opportunity for alpha, or the potential to generate above-benchmark returns – especially at a time of heightened volatility.

Granular views

Six- to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, April 2026

Asset   Tactical view Commentary
Equities      
United States   United States: tactical Overweight +1 We are overweight. Contained damage to global growth from the Mideast conflict and strong earnings expectations – particularly in tech – keep us risk-on.
Europe   Europe: tactical Neutral 0 We are neutral. Europe’s high exposure to the energy shock from the Mideast conflict makes it vulnerable to higher inflation and lower growth.
UK   UK: tactical Neutral We are neutral. Valuations remain attractive relative to the U.S., but we see few near-term catalysts to trigger a shift.
Japan   Japan: tactical Overweight +1 We are neutral. Japan’s exposure to imported energy may erode strong equity gains powered by healthy corporate balance sheets and governance reforms.
Emerging markets (EM)   Emerging markets: tactical Neutral We are overweight yet stay selective. We favor Asian countries that manufacture critical AI components and Latin American energy and commodity exporters.
China   China: tactical Neutral We are neutral. Trade relations with the U.S. have steadied, but property stress and an aging population still constrain the macro outlook. Relatively resilient activity limits near-term policy urgency. We like sectors like AI, automation and power generation.
Fixed income      
Short U.S. Treasuries   Short U.S. Treasuries: tactical Neutral We are neutral. Shorter-term bonds are relatively attractive as the market has woken up to persistent inflation and higher rates.
Long U.S. Treasuries   Long U.S. Treasuries: tactical Neutral We are underweight. Yields already faced upward pressure from rising term premia, as investors demand more compensation for the risk of holding long-term debt. The recent energy price shock compounds this by aggravating pre-existing inflationary pressures.
Global inflation-linked bonds   Global inflation-linked bonds: tactical Neutral We are neutral. We think inflation will settle above pre-pandemic levels, but markets may not price this in the near term as growth cools.
Euro area government bonds   Euro area government bonds: tactical Neutral We are neutral short-term European government bonds. The market has repriced the ECB policy path more in line with our view. We think increased German bond issuance to finance its fiscal stimulus package is already largely reflected in the current level of 10-year yields.
UK gilts   UK gilts: tactical Neutral We are neutral. We expect volatility in gilts over the near-term. Gas powers much of the UK’s electricity, but storage is limited – making it especially vulnerable to a resurgence in inflation.
Japanese government bonds   Japanese government bonds: tactical Underweight -1 We are underweight. Rate hikes, higher global term premium and heavy bond issuance will likely drive yields up further.
China government bonds   China government bonds: tactical Neutral We are neutral. China bonds offer stability and diversification but developed market yields are higher and investor sentiment shifting towards equities limits upside.
U.S. agency MBS   U.S. agency MBS: tactical Overweight +1 We are overweight. Agency MBS offer higher income than Treasuries with similar risk, and may offer more diversification amid fiscal and inflationary pressures.
Short-term IG credit   Global investment grade: tacticalOverweight +1 We are neutral. Corporate strength means spreads are low, but they could widen if issuance increases.
Long-term IG credit   Global investment grade: tactical Underweight -1 We are underweight. We prefer short-term bonds less exposed to interest rate risk over long-term bonds.
Global high yield   Global high yield: tactical Neutral We are neutral. High yield offers more attractive carry and shorter duration, but we think dispersion between higher and weaker issuers will increase.
Asia credit   Asia credit: tactical Neutral We are neutral. Overall yields are attractive and fundamentals are solid, but spreads are tight.
Emerging hard currency   Emerging market-hard currency: tactical Underweight We are overweight. EM hard-currency indexes lean towards Latin American commodity exporters such as Brazil that stand to benefit as Mideast supply plummets.
Emerging local currency   Emerging market-local currency: tactical Neutral We are neutral. The U.S. dollar has been strengthening as a safe-haven currency in the wake of the Middle East conflict. This could reverse year-to-date gains driven by a falling USD.

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Note: Views are from a U.S. dollar perspective. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast or guarantee of future results. This information should not be relied upon as investment advice regarding any particular fund, strategy or security.

Euro-denominated tactical granular views

Six to 12-month tactical views on selected assets vs. broad global asset classes by level of conviction, April 2026

Legend Granular

We have lengthened our tactical investment horizon back to six to 12 months. The table below reflects this and, importantly, leaves aside the opportunity for alpha, or the potential to generate above-benchmark returns – especially at a time of heightened volatility.

Asset Tactical view Commentary
Equities    
 Europe ex UK Europe ex UK: tactical Neutral We are neutral. We would need to see more business-friendly policy and deeper capital markets for recent outperformance to continue and to justify a broad overweight. We stay selective, favoring financials, utilities and healthcare.
Germany Germany: tactical Neutral We are neutral. Increased spending on defense and infrastructure could boost the corporate sector. But valuations rose significantly in 2025 and 2026 earnings revisions for other countries are outpacing Germany.
France France: tactical Neutral We are neutral. Political uncertainty could continue to drag corporate earnings behind peer markets. Yet some major French firms are shielded from domestic weakness, as foreign activity accounts for most of their revenues and operations.
Italy Italy: tactical Neutral We are neutral. Valuations are supportive relative to peers. Yet we think the growth and earnings outperformance that characterized 2022-2023 is unlikely to persist as fiscal consolidation continues and the impact of prior stimulus peters out.
Spain Spain: tactical owerweight +1 We are overweight. Valuations and earnings growth are supportive relative to peers. Financials, utilities and infrastructure stocks stand to gain from a strong economic backdrop and advancements in AI. High exposure to fast-growing areas like emerging markets is also supportive.
Netherlands Netherlands: tactical neutral We are neutral. Technology and semiconductors feature heavily in the Dutch stock market, but that’s offset by other sectors seeing less favorable valuations and a weaker earnings outlook than European peers.
Switzerland Switzerland: tactical Neutral We are neutral. Valuations have improved, but the earnings outlook is weaker than other European markets. If global risk appetite stays strong, the index’s tilt to stable, less volatile sectors may weigh on performance.
UK UK: tactical neutral We are neutral. Valuations remain attractive relative to the U.S., but we see few near-term catalysts to trigger a shift.
     
Fixed income    
Euro area government bonds Euro area government bonds: tactical Neutral We are neutral short-term European government bonds. The market has repriced the ECB policy path more in line with our view. We think increased German bond issuance to finance its fiscal stimulus package is already largely reflected in the current level of 10-year yields.
German bunds German bunds tactical Underweight -1 We are neutral. Markets have largely priced in fiscal stimulus and bond issuance, and expectations for policy rates align with our view.
French OATs French OATss: tactical Underweight -1 We are neutral. Political uncertainty, high budget deficits and slow structural reforms could stoke volatility, but current spreads incorporate these risks and we don’t expect a worsening from here.
Italian BTPs Italian BTPss: tactical Neutral We are neutral. Demand from Italian households is strong at current yield levels. Spreads tightened in line with its sovereign credit upgrade, but a persistently high debt-to-GDP levels means they likely won’t tighten further.
UK gilts UK gilts: tactical neutral We are neutral. We expect volatility in gilts over the near-term. Gas powers much of the UK’s electricity, but storage is limited – making it especially vulnerable to a resurgence in inflation.
Swiss government bonds Swiss government bonds: tactical tactical Neutral We are neutral. We don’t think the Swiss National Bank will slash policy rates to below zero, as markets expect.
European inflation-protected securities European inflation-protected securities: tactical Neutral We are neutral. Our medium-term inflation expectations align with those implied in current market pricing.
European investment grade European investment grade: tactical Neutral We are neutral. We favor short- to medium-term debt and Europe over the U.S. An intense re-leveraging cycle to support the AI buildout could put upward pressure on U.S. spreads, making Europe relatively more attractive.
European high yield European high yield: tactical owerweight +1 We are overweight. Spreads hover near historic lows, but credit losses have been limited in this cycle and better economic growth in 2026 could reduce them further.

Past performance is not a reliable indicator of current or future results. It is not possible to invest directly in an index. Note: Views are from a euro perspective, April 2026. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast or guarantee of future results. This information should not be relied upon as investment advice regarding any particular fund, strategy or security.

Authors

Jean Boivin

Jean Boivin

Head of BlackRock Investment Institute
Wei Li

Wei Li

Global Chief Investment Strategist, BlackRock Investment Institute
Vivek Paul

Vivek Paul

Global Head of Portfolio Research – BlackRock Investment Institute