By Stephen Dover, CFA, Franklin Templeton Institute
(Sponsor Blog)
Executive Summary
• Resilience is the key theme for 2026. Markets and economies have held up well despite geopolitical shocks, policy uncertainty and rising inflation. Global growth remains close to trend, supported by consumer spending, business investment, productivity gains and strong corporate profits.
• We expect investment opportunities to broaden across global equity markets, while corporate credit markets should remain stable. Strong earnings in the United States and emerging markets will support a wider set of opportunities across regions and sectors. • Tighter monetary policy should keep bond yields high and yield curves flat, creating opportunities to earn income. We favor US high-yield credit, select emerging market debt — especially in Latin America — and municipal bonds for US taxpayers.
• Long-term themes remain compelling. Artificial intelligence (AI) is driving demand for energy, infrastructure and broader economic change; rising investment in defense, national security and energy infrastructure create long-term potential return opportunities. Aging populations will require investment in labor-saving technologies, assisted living and health care innovation.
• In private markets and alternatives, secondaries, private credit, real estate and infrastructure offer attractive opportunities.
• Risk to the view. Geopolitical conflict, inflation and a stronger central bank response remain key risks for investors to watch in the second half of 2026.
Introduction
Global Investment Outlook: 2026 and Beyond was built around three cyclical themes — broadening, steepening, and weakening — and three longer-term forces shaping investor portfolios: intelligence, private markets and big government.
Midway through 2026, we think that framework still provides a useful starting point, but the balance of risks has changed. Broadening remains firmly intact, supported by resilient economic growth, strong earnings and improving opportunities across regions and asset classes. But steepening of yield curves has given way to higher-for-longer yields, reflecting higher inflation and tighter monetary policies. Higher yields, however, also offer improved income opportunities in shorter-duration holdings, including US high yield and select emerging markets.
Meanwhile, the US dollar has firmed and is likely to remain rangebound rather than weak over the remainder of 2026. Most importantly, the world did not break. Despite war, tariffs, inflation, tighter policy and geopolitical fragmentation, the global economy and financial markets have held together better than many expected. This update therefore reframes the outlook around a single organizing idea: resilience: both the resilience already evident in economies and markets, and the resilience investors may need to build into portfolios for the remainder of the year.
A more Resilient Outlook (or Resilience in Markets and Portfolios)
The rest of this outlook is organized around one central idea: resilience. The phrase “the world didn’t break” is not meant to suggest that risks have disappeared or that the outlook is free of strain. Rather, it captures the defining surprise of 2026 so far: economies, markets, companies and investors have absorbed a series of shocks without a sustained breakdown in growth, earnings, credit or global trade.
The first sections explain why the global economy and financial markets have held up better than many expected, despite 18 months of geopolitical turbulence, tariffs, war, elections and rising inflation. They also show how resilience has been supported by solid economic growth and strong corporate profits growth across sectors and regions.
From there, we translate resilience into investment implications for equities, fixed income, private markets and alternatives. We also identify key long-term (thematic) opportunities. In all dimensions, we focus on where resilience is apparent and where it can create opportunities for investors in the second half of 2026.
This year, the global economy has demonstrated remarkable resilience in the face of numerous challenges, including geopolitical tensions, trade disputes, fiscal pressures, rising inflation and a sharp re-pricing of central bank policy responses.
Globally, wealth effects and favorable financial conditions have also supported consumption and capital expenditures.
Notably, trade has held up better than many feared following the introduction of high US tariffs in 2025. Global commerce has continued to expand, with important contributions from services.
China’s economy has also demonstrated notable resilience in 2026 despite ongoing challenges from a weak property sector, geopolitical tensions and trade frictions with the United States. The diversification of China’s growth drivers has been a key factor. Strong investment in advanced manufacturing, technology, renewable energy, electric vehicles, batteries and AI has helped offset weakness in real estate. These sectors have benefited from both government support as well as from strong domestic and international demand.
China’s exports have also remained more robust than many expected. Chinese firms have adapted to changing trade patterns by expanding into emerging markets, strengthening supply chains and increasing exports of higher-value-added products. As a result, China has maintained a significant role in global manufacturing and trade despite rising protectionist pressures. Continue Reading…
Gold has ascended to record highs since the start of 2025, proving to be one of the defining stories in the market at the midway point of the decade. Indeed, the yellow metal has rewarded patience as much as conviction with its run-up in 2025 and 2026. The spot price of gold bullion was priced just over US$2,500 per ounce starting 2025 and finished up the year nearly 60%. That momentum carried into the new year in 2026, with gold surging to an all-time high of over $5,500 an ounce in late January.
The gold rally hit turbulence due to the escalating US-Iran military conflict, pushing oil and inflation expectations higher. This prompted markets to price out U.S. Federal Reserve rate cuts, spurring the yellow metal to lose more than 10% in the month of March alone; its worst monthly decline since 2013.
Gold Price in USD/oz Since 2014
Source: Bloomberg, June 30, 2026.
Gold has held onto the bulk of its gains heading into the summer of 2026. That has left investors, particularly those in or approaching retirement, to weigh how the world’s oldest store of value fits alongside the steady income their portfolios need to provide.
The different ways to own gold
Investors have often leaned on gold in two distinct ways: bullion and equities.
Gold bullion, which is represented in physical bars, coins, and the ETFs that track the spot price directly, has served its traditional role as a store of value and a hedge against currency debasement, fiscal uncertainty, and geopolitical shocks. Bullion has no counterpart risk, does not default, and does not dilute. This is why long-term allocators, and central banks, favour it as a ballast. This is the kind of protection retirees may prioritize or seek when preserving capital matters as much as growing it.
Rising sovereign debt and eroding confidence in fiat monetary systems have driven both physical bar purchases and large institutional buying. Meanwhile, global gold ETF inflows reached a record US$89 billion in 2025.
Gold equities, which are represented by gold miners and the ETFs built around them, offer a different exposure entirely. Miners carry operating leverage to the gold price. Their earnings, and respective share prices, tend to amplify moves in the underlying metal, for better and worse.https://www.etf.com/sections/data-dive/gdx-stock-vs-gold-price-miner-etf
HPYG | Gold bullion & gold equities with monthly income
The Harvest Premium Yield Gold ETF (TSX: HPYG) launched on Tuesday, July 7, 2026, and stands as an option for investors who want exposure to both sides of the equation; gold bullion and leading gold equities, without having to choose between preservation and growth. That combined approach pairs the ballast of physical gold with the torque of producer stocks in a single vehicle. Continue Reading…
Yes, I’m stuck in the middle with you
And I’m wondering what it is I should do
It’s so hard to keep this smile from my face
Losing control, yeah, I’m all over the place
Clowns to the left of me, Jokers to the right Here I am, stuck in the middle with you
Stuck in the Middle With You, by Stealers Wheel
Caught between the Rock of FOMO and the Fear of FOL
With the current bull market now into its fourth year and many global stock indices at or near record levels, investors could be forgiven for wondering how much upside there can be from here and when the party will end.
While almost nobody with whom I have spoken believes that a bear market is imminent, they are concerned that it is becoming more likely. Despite this increased wariness, people are also cognizant that running for the hills could entail foregoing considerable gains should markets continue their trajectory. They are trapped between the “rock” of FOMO (fear of missing out) and the “hard place” of FOL (fear of losses). Buffett best described this recurring dilemma in his statement:
“The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future — will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.”
This month, I discuss whether the current bull market has reached a stage where it is something to be feared. To this end, I will ascertain whether it represents an outlier from a historical perspective with respect to its longevity, magnitude, and valuation. I will also discuss the catalysts that have brought an end to previous bull markets and whether any such “markers” are lurking in the shadows.
It’s not a Question of IF, but WHEN
As the following table illustrates, bear markets have hardly been uncommon.
I have no idea when the next bear market will arrive or how severe it will be. For what it’s worth, I don’t think anybody else does either. However, unless you believe that bear markets have become extinct, markets will continue to suffer periodic episodes of malaise. As the saying goes, “You don’t need to know when something will happen to know that it will.”
Looking for the Signs: Mapping the Present to the Past
From a purely statistical perspective, some measures suggest that the current bull market may have considerable life remaining. However, there are also some signs that have portended the demise of its predecessors.
In terms of length, the current runup in equities does not appear long in the tooth. As of the end of last month [June], it has been 1357 days since the end of 2022’s bear market in mid-October of 2022. By contrast, the average duration of bull markets since WWII has been 1905 days.
With respect to returns, the present bull market appears similarly unalarming, with the S&P 500 Index producing a total return of 123.2%, as compared to an average return of 177.4% for all previous bull markets in the postwar era. However, this average is heavily skewed by the bull run that included the late 1990s tech bubble, during which the index produced a total return of 582.1%. Once this extreme data point is removed, the average bull market return falls from 177.4% to a far more modest 140.6% that makes the current bull market appear considerably less youthful.
From a rate-of-appreciation perspective, the current bull run appears somewhat ahead of itself. In its 1357 days of existence, the S&P 500 Index has delivered a total return of 123.2%, as compared to an average return of 104.8% over the same period during the three previous bull markets. Only the post-global-financial-crisis bull run had a greater rate of ascendance, returning 125.4% over its initial 1357 days. However, when equities troughed in March 2009, the forward P/E ratio of the S&P 500 was approximately 11. Once investors became comfortable that the world was not collapsing, bargain basement prices and hyper-stimulative monetary policies served as rocket fuel for stock prices. In contrast, the current bull run began with a P/E ratio of over 16 and current rates are particularly accommodative, which makes this bull market’s pace of gains appear somewhat anomalous.
Perhaps the most striking feature of the U.S. market is its strength over an extended period. With the exception of the short-lived Covid Crash and the relatively shallow and short bear market of 2022, markets have been on a largely uninterrupted winning streak. Annualized returns over the past 10 years through the end of 2025 are 14.68%, as compared to an average of 10.97% for all rolling 10-year periods in the postwar era. In a worst-case scenario, reversion to the long-term mean would require a 44% decline, while a more benign path would necessitate subpar returns over an extended period.
Lots of Steak. But also, some Sizzle
Don’t get me wrong: if earnings growth had kept pace with stock prices over the past ten years, I would not be particularly concerned that stocks have gotten ahead of themselves. After all, it is widely understood that the S&P 500 Index has become increasingly dominated by a handful of mega cap tech stocks that have delivered phenomenal earnings growth. Continue Reading…
By Stephen Dover, CFA, Franklin Templeton Institute
(Sponsor Blog)
Any consideration of emerging markets must begin with the case for global investment strategy. The decision to allocate capital internationally is not just about geographic diversification. Rather, it is increasingly driven by fundamental shifts in absolute and relative returns that drive global capital flows, by the discovery of new investment opportunities, and by the need to identify and manage concentration risk.
This section establishes the reasons why active international allocation strengthens institutional portfolios that also reinforces the rationale for emerging market allocations.
In an extended period of “US exceptionalism”—roughly spanning the 15 years from the global financial crisis to the middle of the current decade — investors increasingly gravitated to US equity and credit markets. That was understandable, given the superior returns — in absolute and risk-adjusted terms — delivered by US financial assets.
Importantly, superior returns on US assets were driven by superior fundamentals, including growth, institutional solidity, vast market liquidity, innovation and historic levels of profitability.
At the same time, however, US-based equity returns became more concentrated, as mega-
capitalization stocks accounted for a growing share of widely followed market-capitalization indexes.
Partly driven by concerns about concentration risk and partly because of improving returns in other
markets, investors have more recently begun to look for opportunities in other markets.
Over the past year, European, Japanese and emerging equities, and particularly emerging debt, have episodically produced superior returns to those found in US equity and fixed income markets. Those outcomes have begun to raise awareness of global opportunities, among them in emerging markets.
Renewed interest in global investing stems from other factors as well. Economic and monetary policy
divergence is becoming more significant. Prior to the US-Iran War, the Federal Reserve (Fed) was
biased to cut rates, the European Central Bank (ECB) had paused its easing cycle, the Bank of Japan
(BoJ) had already cautiously begun to hike rates, and various emerging central banks were prepared
to cut rates amid falling inflation. Those divergences in policies had contributed to a weakening of
the US dollar since early 2025, which in turn boosted investor interest in non-US markets, including
in emerging markets.
With the outbreak of the war and the impairment of shipping via the Strait of Hormuz, policy
perceptions have again shifted. The Fed and emerging central banks are now (mostly) on hold, the
ECB and the BoJ are inclined to tighten their monetary policies. Unsurprisingly, volatility, correlation
and returns have shifted markedly.
But the underlying point remains: Divergence in the conduct of monetary policy creates opportunity for tactical re-allocation. And it isn’t just about monetary policy. In many respects, fiscal policy divergence is even more notable.
In the United States, large structural budget deficits are forecasted over the next decade.
Meanwhile, Japan’s new government is promising more fiscal stimulus as well. So, too, are Germany and the European Union.
In contrast, over the past decade many emerging countries have been pursuing more disciplined,
orthodox fiscal policies, with the upshot that their sovereign credit fundamentals are improving in
absolute and relative terms. That trend lends support to secular declines in risk premia and should
manifest in even lower nominal and real interest rates, as well as stronger emerging currencies.
Directly, that boosts emerging debt returns, but it also lends greater resilience to many parts of the
emerging complex.
As noted, global markets — including emerging markets — have recently exhibited episodes of
outperformance relative to US equity and fixed income returns. That is important, because for most of
the past 15 years US exceptionalism has been dominant. So much so, indeed, that if one compares the
efficient frontiers of investing with and without emerging markets since 2010, it is clear emerging
market allocations had almost no positive impact on portfolio returns, adjusted for risk, over the past 15
years.
But we believe those historic results are not likely to persist. Owing to improving emerging market
fundamentals, which we describe in detail in the next section of this paper, absolute and relative
expected returns are shifting in their favor. Using our estimated year-ahead returns across all
markets — developed and emerging, public equity and debt — a clear upward and leftward shift in the
efficient frontier is apparent when comparing a developed market only to a blended emerging and
developed portfolio. We believe emerging markets (alongside other non-US developed markets) are
therefore poised to contribute to improved portfolio performance in the year ahead: and most
probably for longer.
EMs are undergoing a profound transformation, one that is not cyclical in nature but structural, durable and increasingly self-reinforcing. The traditional narrative of emerging markets as externally dependent, volatility-prone economies is being reshaped by a new set of underlying forces that are redefining their role in the global economy.
EMs have generally shown significant resilience this decade, facing down a series of shocks arising from the COVID-19 pandemic, the inflationary outcome of the Russia-Ukraine war and the US Fed’s sharp interest-rate hikes during 2022-2023, and last year’s substantial tariff volatility. Not only did EMs survive this period, but many have thrived.
As world trade reconfigures and global actors realign geopolitically, EMs have found themselves generally well-placed to benefit from these global shifts: including some that are likely to benefit under the new tariff regime. This compares to earlier years when EMs would often face crises (whether debt, balance of payments and/or in banking systems) from global shocks.
The fact that EMs are in a favorable position now is largely a result of policy choices that have situated them handsomely to face a rapidly changing world economy. In this regard, we note three significant global regime changes that we believe EMs are now well-placed to benefit from: structural improvements in EMs, global trade econfiguration, and a shift in the US dollar’s ability to attract global capital inflows.
Regime change: EMs are structurally sounder
Policy responses with respect to both monetary and fiscal policy have improved significantly across EMs over the past couple of decades. Adoption of sound, credible policies and nurturing of institutions (such as inflation targets, fiscal rules and independent central banks) have helped policy formulation and improved the market’s perception of the credibility of EM policymakers. Continue Reading…
I liked Charles Ellis’ book Winning the Loser’s Game so much that I had to read his latest: Rethinking Investing. It is very short at just over 100 small pages, but is packed with good advice. Some of it is specific to U.S. tax laws, but most of it is useful for Canadians.
Ellis takes on three huge areas of personal finance. The first is your portfolio allocation, or what you should invest in.
The second is your savings plan, and the third is your “spending rule,” or how to spend your assets during retirement.
A detailed treatment of these areas could easily run to thousands of pages, so this book is necessarily at a high level. Ellis wants you to get the broad ideas right, so that you won’t make big mistakes as you fill in the details.
Ellis calls compounding investment returns “your power curve.” He explains that most of your investment growth comes at the end, which provides motivation to begin early. Saving is “your first priority.”
Saving
He offers thirteen specific suggestions for saving money, such as use employer matching, automate deductions from pay, invest bonuses, buy preowned cars, consider a smaller house, “self-insure for auto damages under $10,000 — or whatever you can comfortably afford to pay in the unlikely event of a major accident” — and use term life insurance.
Unlike recent popular advice to focus only on big expenses, Ellis says that “Lots of small-expense items can add up and cut your potential savings.”
Investing
Ellis repeats the main themes of Winning the Loser’s Game to explain why low-cost index investing is the way to go. “The growing market dominance of expert professional investment managers … has made the market harder and harder to beat.”
There are three factors slowing down the “widespread adoption of indexing.” Referring to index investing as “passive” has negative connotations for most people. “Nobody wants to be known as passive.” The second factor is that “most investors find it hard to believe that talented active managers with superb information won’t beat the market.”
These active managers “fought against indexing as though they and their careers were seriously threatened: as they surely were and certainly are!” The third factor comes from the media, who know “that indexing’s persistent successes would not make for compelling or even interesting copy.”
When investors make active choices on market timing, they tend to perform poorly. Unfortunately, Ellis points to reports from DALBAR for evidence of this pattern. While it’s true that retail investors make poor market timing choices on average, DALBAR’s methodology for computing their losses is nonsense.
Bond allocation
Ellis makes an interesting pitch for investors to own more stocks and fewer bonds. He asks investors to include the following as part of their bond allocation: “home equity, the present value of your Social Security benefits [CPP and OAS in Canada], and your future estimated savings plus any likely inheritance.”
While I think many people would be better off with a lower bond allocation during their working years, I have to push back on the future estimated savings and inheritances. Maybe government workers can treat future savings as bond-like, those in the private sector have a lot of uncertainty in their future savings.
As for an inheritance, I see huge uncertainty in most cases. A parent may end up needing the money for elder care, or may give it to someone else, or may have less money than you think. The money I will leave to my sons is mostly invested in stocks, and they will get what’s left after all my spending. The amount they will get does not have bond-like attributes.
All that said, if thinking about home equity, government payments, future savings, and an inheritance helps people tolerate the short-term swings in stock prices, then maybe Ellis is right to give this advice, even if it isn’t all technically correct.
Retirement spending rule
Ellis encourages people to think about drawing from their savings in retirement like a university endowment. “First, average the year-end values of your assets over the prior several years (preferably more than five years) to dampen the impact of market fluctuations.” Then choose a prudent annual withdrawal percentage, “likely 4–5%.”
“For example, if you settle on a 5% rate of withdrawal and a six-year moving average of the year-end value of your assets, a 30% drop in the stock market would lead to only a 5% reduction in your payout that year.” This approach offers an alternative to “having a portfolio laden with low-return bonds.” Continue Reading…
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