266. 2026 Midyear Outlook: Scarcity vs. Abundance in the Age of AI
Web title: 2026 Midyear Outlook: Scarcity vs. Abundance in the Age of AI
Full episode description:
Artificial intelligence continues to reshape economies and markets, but its rapid expansion is also exposing new constraints across energy, infrastructure, labor, and capital. As investors navigate an increasingly complex landscape, the debate has shifted from AI's potential to the practical realities of building the systems that support it.
In this episode of The Bid, host Oscar Pulido speaks with Jean Boivin, Head of the BlackRock Investment Institute, about BlackRock's 2026 Midyear Outlook. Together they examine the report's central theme - scarcity versus abundance - and discuss how AI, higher capital requirements, geopolitics, and structural economic changes are influencing today's investment landscape.
Jean explains why today's market environment is defined by multiple competing outcomes rather than a single base case, introducing the concept of polyfurcation. He also explores the evolving AI investment opportunity, the importance of infrastructure, the role of tactical portfolio construction, and why investors may need to rethink traditional diversification as megaforces continue to reshape markets.
Key insights
How AI is creating both new opportunities and new economic constraints
Why scarcity has become a defining macroeconomic theme
How polyfurcation changes the way investors think about uncertainty
Why infrastructure is becoming central to the AI investment story
How portfolios may evolve beyond traditional asset class diversification
Where investors are focusing as AI continues to reshape global markets
Keywords: AI investing, Midyear Outlook, capital markets, infrastructure investing, megaforces, stock market trends, artificial intelligence, global economy
Sources: BlackRock Investment Institute, Midyear Outlook 2026
Written Disclosures In Episode Description:
This content is for informational purposes only and is not an offer or a solicitation. Reliance upon information in this material is at the sole discretion of the listener. Reference to any company or investment strategy mentioned is for illustrative purposes only and not investment advice. For full disclosures, visit blackrock.com/corporate/compliance/bid-disclosures.
<<TRANSCRIPT>>
Oscar Pulido: Just six months ago, investors were asking how quickly artificial intelligence could transform the global economy. Today, the conversation has become more complicated. AI continues to reshape business and markets, but it also demands enormous amounts of power, capital, infrastructure, and skilled labor. At the same time, geopolitical fragmentation, aging populations, and rising debt are creating new constraints across the global economy.
So, are we entering an era of abundance powered by AI or a period where scarcity becomes the defining feature of markets? Welcome to The Bid, where we break down what's happening in the markets and explore the forces changing the economy and finance. I'm Oscar Pulido.
Today, I'm joined once again by Jean Boivin, head of the BlackRock Investment Institute, to discuss BlackRock's 2026 midyear global outlook. We'll explore why scarcity has become the defining investment theme, what the institute calls the six big macro calls investors are making today, and how portfolios may need to evolve in a world where the future could unfold in dramatically different ways
Jean, thank you so much for joining us on The Bid.
Jean Boivin: It's great to be here.
Oscar Pulido: Well, Jean, you and I speak about every six months to talk about the BlackRock Investment Institute and the outlook for the markets. And six months doesn't feel like a long time, but these days it feels like a lot happens in the markets.
Recently you brought together the investment community of BlackRock to talk about the midyear outlook, and the theme of this outlook is scarcity versus abundance. What does that phrase capture, and why did it become the central theme of this outlook?
Jean Boivin: There are two main reasons, I think, that, makes that theme work for us. The first one is we've been talking for the last few years about a world shaped by supply. We thought we had entered a new regime very different from the decades prior to 2021 that was really characterized by limitation on the supply side. So that's what the scarcity, aspect of the title is getting at, and we think that the scarcity thematic is getting even more real. AI is creating, additional scarcity. It's putting pressure on resources, on the labor market, on physical inputs, chips, and so on. So, the scarcity aspect is an evolution of the world shaped by supply.
But the contrast with abundance is it comes from another feature of this environment, which is that there are these widely, different competing narratives that are playing out at the same time. And so, we tend to believe that scarcity is the story of the day, but at the same time, there's a strong abundance narrative out there about how AI is going to create all of this abundance that is already being ma- felt and materialized. We're going to maybe see a breakout from 2% growth in the US.
We're going to see disease being, eradicated according to some. And so, you see in parallel like a real scarcity at the same time as we talk about potentially solving all of the scarcity problem and being in a world of abundance. And we think that reflects another feature of this environment, which is that we are facing big calls. Big calls that are very different from each other and yet they cannot really be avoided. So that's the scarcity versus abundance frame.
Oscar Pulido: And Jean, before we go to those big macro calls, you mentioned 2% growth in the US when you were talking about the abundance part of the narrative. That 2% growth is not necessarily just a recent number. I think that's a long-term historical number. Maybe you can talk a little bit more about the significance of that number and the impact that AI could have on that number.
Jean Boivin: So, what is really remarkable is again that we are talking about the possibility of abundance. And what that means is for the last 150 years we have been in a world, the US was at the frontier, and that frontier has been growing at 2% per year. All the ingenuity of the 140- 50 years, that's about the Industrial Revolution, electricity, the internet, all of this has only been enough to keep us on that 2% trend. But now we talk about, forecasts where we could break out from two. The median from what is being currently being discussed is 3.5 percent trend growth. 3.5 might sound like a still a reasonable number, that's a massive increase from the 2% world. If we were really accelerating to 3.5%, it would be a world of abundance compared to what we have been. But it hasn't happened for 150 years. No, no innovation so far has ever managed to do that. Right now, we're in scarcity, but if AI does lead to, an acceleration and a breakout, that would be a massive game changer.
The last point I would make is if you just look at history, you say it's not likely to happen. However, AI might be the thing, for the first time making that conceivable. And the key thing is whether AI, leads to not only innovation but an acceleration of innovation. That's really the key thing that AI could do through the self-learning aspect and improvement that AI comes with. And if that does materialize, you can conceive now maybe some acceleration and now abundance being, maybe something that you can take seriously.
Oscar Pulido: So that breakout in growth hasn't happened yet, but it's something to monitor. And speaking of monitoring, let's go back to those macro calls that you mentioned, and the outlook talks about six big macro calls, things like AI-led growth, interest rates, geopolitics, US equity leadership and whether that will continue, there are a few others. Why is it important for investors to recognize these calls and how they might already be embedded in their portfolios?
Jean Boivin: Well, the reason why we make a big deal out of this is because it's unusual. there's always, calls to be made, whether the Fed's going to cut rates or not. Here we're talking about really big calls the first we talk about scarcity versus abundance. Dramatically, different world.
On AI, will AI be cheap going forward? will token price keep going down, and is it going to become more of a commodity? Or is AI going to get more expensive from here? We don't know that - that's a big call. It's going to determine how quickly AI is being used, whether it displaced labor or not. Another call is around the rate environment. it feels intuitive, and I think the most common narrative is that AI will lead to efficiencies that could lead to lower costs and low inflation, and maybe if that's true, then we have lower rates as a result. That seems intuitive and, it's pretty common. But it's far from obvious.
AI has the other feature which is it creates demand on resources. we're going through the fastest, biggest build-out. that's going to put pressure on resources, on energy, and you could see more competition for capital to finance this, and that would be putting pressure on rates to go up. Rates would be structurally higher.
So, you have these two competing narratives on rates that are both driven by AI. We don't know yet, big calls. We have, geopolitical choke points. We've just went through like a big illustration of that with the Middle East. Those have shown that we have vulnerabilities like the Strait of Hormuz, being a key choke point for supply chain.
It hasn't had the impact on market that you might have expected because throughout there's been hope that we were going to reopen the strait in fairly short order. There's more hope now that this is actually happening. But the alternative would have been a world where, it stays closed, and it's binary, and a world like this would have been the biggest supply shock in history. So again, another big call and then you can think also of US leadership, for markets. That has been a question in many global investors last year. Will the US retain its status as the leader in global markets to generate the return, earnings, and profits? That's a question that was on the table, but it's a big call. And so far, taking the other side of the US hasn't really worked out. It might over time, but it's a big call.
Oscar Pulido: Another concept that you introduce in the outlook is 'polyfurcation', and we're going to need a little help here understanding the true definition of this word. So, tell us, what does it mean, and why do you think it's a better way to think about markets today than simply talking about uncertainty?
Jean Boivin: Yeah. throughout my career, I think at every year in my career, there's been claims that we were facing the highest uncertainty we've ever faced, every year. What we are trying here to convey, though, is that the nature of the uncertainty that we're facing is completely different.
And we've already talked about these big calls, which is a step in the direction of what we're describing here. But it's really that, it's not like you have a central base case and around which there's a distribution and you're going to learn and you're going to adjust, it's we can go left or right. if it was only two options, we would have talked about bifurcation. But since we have more than two here, we went from bi to polyfurcated, to capture this idea. But it's really about binary or, or bifurcation, that is the true nature of this uncertainty, and that has massive implications on how you think about, portfolio or even policymaking.
In the industry, we've been used to think about building strategic asset allocation that was providing a long-term anchor to portfolio because you could articulate a base case in the long term and have some confidence on it. Right now, this is very hard to do, there's not such a base case. So, the uncertainty we really are facing is not so much a near-term dynamic. It's really about the long term, and it could go in very different directions. So that calls into question whether we should put more faith on long-term asset allocation than short term. We actually think that probably not, and we need to be all more tactical as a result. It calls into question policymakers. they cannot rely as much on the long-term forecast and think of it as being stable. That's something that now, the long term is probably the most important source of uncertainty that will then dictate what's happening in the short term.
So, polyfurcated really means, a different type of uncertainty that cannot be easily handled by having a base case with some uncertainty around it. You need to handle multiple scenarios always and keep track of them.
Oscar Pulido: Well, we have to use different words for this environment because it is a very different economic environment, and certainly AI continues to be at the front and center of these different scenarios that we keep talking about.
Of course, the conversation feels different when we talk about AI. We've moved on from whether this is real or not because I think we're seeing evidence that it's having an impact at the macroeconomic level and at the company level. Now, it seems like we're talking more about bottlenecks, infrastructure, and who captures the value in this AI transformation. How has your thinking on AI evolved over the last six months, and where do you see the biggest investment opportunities today?
Jean Boivin: So, when we last spoke about this AI, story six months ago, we were talking about the potential for AI to be the fastest build-out of CapEx in history and the largest.
Starting point here, I think, is that now six months after, that was already the framing, and now these intentions have been scaled up by 30%. So, taking a pause here and just absorbing what these numbers are. We were talking about five to eight trillion six months ago. These numbers have been scaled up by 30%, -three, zero.
So that tells you about how fast this is happening. So, people could have said six months ago Well, these are only aspiration and ambition. Who knows what's going to happen? we've seen that numbers being deployed that are faster, it's front-loaded, and we revise upward the entire trajectory by 30%.
So, it's happening. The build-out is real. we've also seen, more proof point that revenues can be generated on the back of AI. So, this year has seen very surprising result in terms of earnings and have created so a better handle on reconciling the spent and what we're building and with potential revenues coming. So, there's a bit more evidence to support that conjecture that we had six months ago.
Now, I think what is also becoming clearer in the last few months, I've made that clear, is that we are going to see, very significant disruption. We don't know quite where they're going to be.
We've seen, software being the place where markets have been providing attention recently. But the reality is we know there's going to be quite a bit of disruptions. We don't quite know where it is going to be, and there's going to be a lot of debate. I think the disruption and the disruptee, like the losers, will become clear before we get clarity on the winners.
And so, one of the things that leads you in terms of investment is trying to find ways to get exposure to AI without having to pick the winners. and if you can do that's pretty attractive. So, participating in the build-out, like through infrastructure is one way to do that. You don't know who's going to be using that infrastructure five years down the road. Maybe it's not those that are currently building it, but there's going to be a use for that infrastructure because AI will be a, a real thing. So rather than picking the winners, you can, participate in the build-out in a way that is a bit more neutral. That's an example of the evolution, of, of the AI theme.
I think this, the fact that we're going to see more disruption and we're going to see winners and losers also means, and that's a strong belief we have, that this is an environment that's going to create more opportunity for Alpha. Those that have early insights on who might be winning or have the right framing on what's going to determine that will probably be able to generate outsized return more so in this environment at any point in the last few decades. So, it's an AI story that is broadening. it's not a market that is broadening beyond AI, but it's, an AI story that is broadening,
You can be totally bullish on AI that doesn't necessarily equate to being bullish on the S&P 500. AI can be so real that it disrupts the current kind of incumbents. And so, on the way to AI winning, you might see some disruption and it's not going to be simply as just being, overweight US equities all the time throughout this AI build-out.
Oscar Pulido: So, since we're talking about portfolios, and you're starting to talk a little bit about asset classes and winners and losers, one of the things that the outlook argues is that traditional portfolio construction may no longer work as well as it once did, and that investors need to think beyond the traditional asset class label. So, what do you mean by that, and how should investors be rethinking diversification in today's environment?
Jean Boivin: So, the, the environment that I've described that we put a name on, - polyfurcated - where you have mega forces that are shaping the structural transformation. We've been living in that world for a few years now, and I think we've seen as a result that the traditional approach to portfolio construction has been challenged.
Diversification that we would have expected from asset classes, bonds versus equity, has not played out. And I think that has led, as a result, clients to reconsider. And that has been, basically put under the label of total portfolio approach. The alternative that clients are trying to look through and trying to define, as a name, Total Portfolio Approach. What they actually mean by that is not clear, but it's a catch-all for, anything that would be different from the traditional approach.
And I think the core feature we see there, is if we expect, asset classes to behave the way that they have historically, it's unlikely to go back or to happen as long as we think that we're in a world shaped by mega forces.
And instead, we might want to think about diversification, not at the asset class level, but at the level below that. Think about AI, AI is a theme. There are different ways to play the theme. You can think about the credit component to it. You can think about different aspect of the capital stack. You can think about different companies playing in different parts of the AI, and that's a way to build a diversified exposure, that you won't be able to get by just thinking about assets, or bonds versus equity.
So, we think the new way of thinking is to try to move beyond labels. One is a theme of our outlook, by that we mean the asset class labels. And think about opportunities that are more thematic, or related to mega forces, and think about diversification at that level, rather than just hoping it from the at the asset class. So that's a general direction for rethinking portfolios.
And I mentioned infrastructure before, but I think infrastructure is a poster child right now of that broader thinking. If you want to think of infrastructure as an asset class, which we tried to, we had a paper last year to try to do that, you're contorting yourself into trying to define something that is not really an asset class. Infrastructure is building like physical things - data centers, ports, and things like that, real asset in some ways. And if you go with an asset class mentality, you're going to start to put it in the public or private buckets, and then within that, you're going to think about how much I subdivide that in terms of infrastructure. And you're going to end up, allocating a fairly small amount to infrastructure if you go with the traditional, asset class breakdown. But instead, if you think about the economic return drivers that know, AI is or that the energy transition implies and so on, and you think about how much of infrastructure has to play there, you're going to get to an allocation to infrastructure that's going to be quite a bit higher than, an asset class lens.
And we think that's closer to the truth of what will be the right allocation. So that's a poster child of trying to unshackle ourselves from the asset class frame and, think a bit more broadly about how you actually get the exposure.
Oscar Pulido: Jean, we started with the theme of the outlook being scarcity versus abundance, and it sounds like scarcity is the, near term reality of the world, but abundance is maybe the longer-term opportunity. If that is the case, what should investors be doing over the next six to 12 months while that story plays out?
Jean Boivin: So, first thing I would say is, there's going to be a lot of talk about AI bubble, and people will point to valuations, and we should track this. It boils down to, whether you think the earnings potential, is durable.
For now, we think this is too early to throw the towel on this and conclude that this is a bubble, so we would advocate maintaining exposure to the AI public market equity themes, and that's why we have still an overweight US equities given that this is where it's playing out, most predominantly.
Now, another key theme is income, we think we're in a world of scarcity, which will maintain rates relatively elevated. Not that they're going to go up necessarily dramatically, but we don't think they're going to come down much. So that income is durable, and that's going to be attractive. And in Europe in particular, we think that's even more attractive on a regional basis given how far the markets have been expecting hikes to happen there. So durable income is an interesting place to be.
We also think that we need to think beyond asset class more generally. as I mentioned, infrastructure is one example of this. we think alpha has more potential in this environment. And at the end of the day, you cannot avoid making big calls. As I said, we're going to be exposed one way or the other. But if you don't know, or don't have any conviction, the place to fall back is on the widest kind of exposure to the universe, of investment possibilities. So, not just one market and one region, but to get as broad exposure as possible to the cap weight index of this universe. So, these are the way to play the practically, I think, the, this environment. But AI is clearly at the center and will determine those returns.
Oscar Pulido: Perhaps the other thing to do over the next six to twelve months is to continue to follow what the BlackRock Investment Institute is saying and follow how the world is evolving and maybe some of those more dynamic and adaptive shifts that you have to make in portfolios.
Jean, I mentioned we only speak, about once every six months, and it's not really that long of a period of time, but it seems like this day and age, a lot of stuff is happening. So, thanks for being with us today to do a bit of a mark to market of where we are in terms of markets and the economy, and thanks for doing it here on the bid.
Jean Boivin: Thank you so much. It was a pleasure.
Oscar Pulido: thanks for listening to this episode of The Bid. We'll be taking a bit of a break over the summer but still bringing you new content every other week until we go back to our regularly weekly scheduling in September. Up next, we'll stay on the theme of geopolitical fragmentation and look at one area where those forces are already reshaping markets: defense investing. Make sure you subscribe to The Bid, so you don't miss the episode
<<SPOKEN DISCLOSURES>>
This content is for informational purposes only and is not an offer or a solicitation. Reliance upon information in this material is at the sole discretion of the listener. Reference to the names of each company mentioned is merely for explaining the investment strategy and should not be construed as investment advice or recommendation. For full disclosures, visit blackrock.com/corporate/compliance/bid-disclosures
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