Pictet AM: A Clear Perspective on the Markets Leading Up to 2026
As 2026 begins, we find ourselves in a paradoxical context: a more stable global economy than expected, inflation moving towards normalization, a weakening dollar, and a technological super-cycle that continues to transform economic models. During a conference on December 4th, Pictet Asset Management shared its insights: measured optimism for equities, selective caution regarding credit, and vigilance concerning the dispersion created by artificial intelligence.
An Economy More Resilient Than It Seems
The US economy is slowing down without truly faltering. The unemployment rate is expected to reach 4.5% by 2026, a level slightly above the estimated full employment rate but still consistent with a robust economy. After a rapid tightening phase, the Federal Reserve is expected to continue its rate cuts to a terminal level around 3%. Household demand will be supported by a $70 billion tax credit program at the beginning of the year, an element rarely factored into usual macroeconomic projections.
US inflation is stabilizing around 3%, a level the Fed considers acceptable for maintaining an accommodative monetary policy. Meanwhile, the dollar continues its correction following a marked 12% decline in 2025; Pictet anticipates an additional 4 to 5% drop in the Dollar Index in 2026. This easing contributes to calming global financial conditions.
In the markets, the « magnificent seven » continue to capture attention. Their profits represent 37% of those in the S&P 500, an unprecedented concentration. However, the major difference from the year 2000 lies in the fundamentals: most of these companies exhibit high margins, strong profitability, and substantial cash flows. While some valuations, such as Palantir's (P/E 200), seem extreme, they fit within a technological landscape where business models are more mature and usage is more established.
AI, Diversification and Allocation: Pictet's Key Focus Areas
For Pictet, AI represents a super-cycle of innovation that extends beyond the financial markets. The rapid adoption, exemplified by ChatGPT reaching one million users in five days, is supported by massive investments in data centers, robotics, and infrastructure. The United States leads in language models, while China leads in robotics and unlisted AI. In both cases, technological acceleration is widening the gap between companies able to capitalize on it and those that will be left behind — a major factor in stock selection.
Pictet remains positive about equities, particularly in the United States, but does not make technology a systematic preference. Solar energy, certain biotech firms, and several Chinese segments offer opportunities. In terms of bonds, the firm favors European sovereign debt, deemed healthier than American debt amid growing public debt overseas. It remains neutral on IG credit and cautious on High Yield, where tight spreads no longer reflect the full scope of sector risks.
Risks persist: Bitcoin's volatility, increasingly correlated with the Nasdaq; the uncertain macro trajectory in China; weaknesses in American private credit; and the ambiguous role of the Bank of Japan, where a potential rate hike could destabilize the global carry trade.
This content has been automatically translated using artificial intelligence. While we strive for accuracy, some nuances may differ from the original French version.
