BlackRock 2026 Investment Outlook: Can the Global Bull Market Driven by the AI Bubble Be Sustained?

2025-12-06 12:34:03

Author: Azuma, Odaily Planet Daily

On December 2, BlackRock, the world’s largest asset management company, released its 2026 Investment Outlook report. While the report has little direct connection to the cryptocurrency market (only one page out of an 18-page PDF mentions stablecoins), as the “king of global asset management,” BlackRock outlines the current environment and variables in the global economy. As the link between the cryptocurrency market and mainstream financial markets grows ever closer, the report may provide some guidance for future macro changes. In addition, BlackRock also shares its portfolio strategies for the new market environment, which may serve as a useful reference for users looking to broaden their investment scope.

The full report is quite lengthy. Below, Odaily Planet Daily will attempt to summarize BlackRock’s 2026 playbook.

“Mega Forces” Reshaping the World

BlackRock notes at the outset that today’s world is undergoing structural transformation driven by several “mega forces”—including geopolitical fragmentation, financial system evolution (Odaily note: this mainly refers to stablecoins), and energy transition. The most significant of these is undoubtedly artificial intelligence (AI)—whose rapid and large-scale development, and the shift from “light capital” to “heavy capital,” is profoundly changing the investment environment.

In today’s market structure, investors can hardly avoid making directional calls on the future—meaning there is no truly neutral position, and even broad index investing is not a neutral choice.

Dominant Force: AI

AI currently sits at the center of these mega forces, driving the US stock market to new highs this year. In recent months, investors have become increasingly concerned about whether an AI bubble is forming—Shiller P/E ratio data shows US stock valuations have reached peaks not seen since the dot-com bubble and the 1929 Great Depression.

Historically, major periods of transformation have often seen market bubbles; this time may be no exception, though bubbles usually only become obvious after they burst. For this reason, BlackRock’s report focuses on whether the scale of AI investment matches its potential returns—this is both the main thread BlackRock is following in the AI tech revolution and the core question the report aims to answer.

BlackRock believes that the AI theme remains the main driver of the US stock market, and thus the institution will maintain a risk-on stance. However, the current market environment demands higher standards for active investment. Whether identifying the winners in the current AI race or capturing opportunities as AI benefits spread in the future, active selection will be crucial.

Key Market Question: Is “Front-Loaded Spending” Matched by “Back-End Returns”?

Currently, the core question for market investors is how to assess whether the massive capital expenditures on AI are matched by its potential revenue scale.

AI development requires upfront investment in computing power, data centers, and energy infrastructure, but the ultimate returns on these investments are delayed. The time gap between capital spending and eventual returns has led AI builders to turn to debt to bridge funding challenges. This front-loaded spending is necessary to achieve ultimate returns, but it also creates a distinctly different investment environment—characterized by:

Higher leverage: Substantial increases in public and private credit issuance;

Higher cost of capital: Massive borrowing pushes up interest rates;

Concentrated opportunities: Until AI benefits spread to the broader economy, market gains remain highly concentrated in the tech sector;

More room for active investing: Once revenues truly spread beyond tech, opportunities for active management and stock picking will increase significantly.

There’s no definitive answer to whether spending and income are matched. BlackRock believes the final answer depends on whether US economic growth can break through the long-term 2% trend line.

BlackRock expects that capital expenditure on AI will continue to support economic growth through 2026, with this year’s investment contributing three times the historical average to US economic growth. This “heavy capital” growth dynamic will likely persist into next year, allowing economic resilience even as the labor market cools.

But is this enough to push US economic growth beyond its long-term 2% trend? In the past 150 years, all major innovations—including the steam engine, electricity, and the digital revolution—have failed to break this ceiling. However, AI may make it possible for the first time. The reason: AI is not only an innovation in itself, but it can also accelerate other innovations. It goes beyond automating tasks—it can self-learn and iterate, speeding up idea generation and scientific breakthroughs.

Three Core Themes

Micro Becomes Macro

AI infrastructure construction is currently dominated by a handful of companies whose spending is now large enough to have macro-level impact. While the overall revenue generated by AI in the future may support this spending, it’s still unclear how much of the pie the leading tech companies will capture.

BlackRock will maintain a risk-on stance and overweight US equities for the AI theme (underpinned by strong earnings expectations; even if some companies do not fully recoup investments, overall capex is likely to be rewarded) and believes this is a prime time for active investing.

Rising Leverage

Crossing the “front-loaded investment, back-end return” funding gap in AI development will require long-term capital support, making leverage inevitable. This process is already underway, as seen in recent large-scale bond issuances by major tech companies.

BlackRock expects companies to continue tapping both public and private credit markets at scale. The expansion of borrowing by both public and private sectors may continue to put upward pressure on interest rates. High debt servicing costs are one reason why we expect term premium (the compensation investors require for holding long-term bonds) to rise and yields to increase. On this basis, we are underweight long-term US Treasuries.

The Diversification Trap

Portfolio decisions made in the name of “diversification” have, in fact, become more active bets than ever before, aimed at avoiding the few forces currently driving markets. BlackRock’s analysis shows that after removing common equity return drivers like value and momentum, a growing share of US equity returns reflects a single, common driver. Market concentration is rising, breadth is narrowing. Attempting to diversify US or AI risk exposure by shifting to other regions or equal-weighted indexes essentially constitutes a more active decision than before.

BlackRock believes that true diversification means moving from broad asset class or regional views to more precise, flexible allocations and themes that work across scenarios. Portfolios need a clear Plan B and must be ready to pivot quickly. In this environment, investors should reduce blind risk spreading and focus more on conscious risk-taking.

Views on Stablecoins

When summarizing the “mega forces” currently reshaping the global economy and financial markets, BlackRock highlights five areas: AI, geopolitics, financial system, private credit, and energy infrastructure.

In the area of financial system evolution, BlackRock examines the development of stablecoins as the sole example. The trend BlackRock sees is that stablecoin adoption is expanding and further integrating into mainstream payment systems.

Stablecoins are poised to compete with bank deposits and money market funds, and if their scale becomes significant, they could materially affect how banks provide credit to the broader economy. Beyond banking, BlackRock also notes the potential for stablecoins in cross-border payments. In emerging markets, stablecoins can serve as an alternative to local currencies for domestic payments and broaden the use of the dollar; at the same time, if local currency use declines, this could challenge monetary policy control and, to some extent, support the dollar.

These changes mark a mild but important step toward a tokenized financial system. This system is evolving rapidly—digital dollars coexist with traditional channels, reshaping intermediation and policy transmission.

BlackRock’s Allocation Plan

Now, for the most important part: at the end of its report, BlackRock provides its allocation strategies for various asset classes and analyzes its investment logic from both tactical and strategic perspectives. “Insight is less valuable than imitation”—if you’re not keen on racking your brains for independent thought, perhaps just copy the homework.

For periods over 5 years (strategic) and 6-12 months (tactical), BlackRock’s core allocation ideas are as follows.

Strategic level:

Portfolio construction: As AI winners and losers become clearer, we prefer scenario analysis for portfolio construction. We rely on private markets and hedge funds for special returns, anchoring allocations to “mega forces.”

Infrastructure equity and private credit: We see attractive valuations in infrastructure equity, with mega forces supporting structural demand. We remain bullish on private credit but foresee divergence within the industry—highlighting the importance of manager selection.

Beyond market-cap-weighted benchmarks: We will make more nuanced allocations in public markets. We favor developed-market government bonds outside the US. For equities, we generally prefer emerging markets over developed, but are selective within both. Among emerging markets, we favor India at the intersection of several mega forces; among developed markets, we like Japan, as moderate inflation and corporate reform are improving its outlook.

Tactical level:

Remain bullish on AI: Strong earnings, robust profitability, and healthy balance sheets of large, listed tech companies will continue to support AI development. The Fed’s accommodative policy through 2026 and reduced policy uncertainty reinforce our overweight US equities position.

Select international exposure: We are bullish on Japanese stocks due to strong nominal growth and successful corporate governance reforms. We remain selective on European equities, preferring financials, utilities, and healthcare; in fixed income, we favor emerging markets as their economies become more resilient and fiscal and monetary policy more robust.

Evolving diversification tools: Since long-term US Treasuries no longer stabilize portfolios, we recommend finding a “Plan B” hedging tool and staying alert to potential sentiment shifts. Gold, with its unique drivers, can be used tactically but is not seen as a long-term hedge.

In more detail, BlackRock’s allocation logic and reasons for stocks and fixed income across various markets are as follows:

US equities (overweight): Strong corporate earnings (partly driven by AI themes) and a favorable macro backdrop support US equities;

European equities (neutral): More pro-business policies and deeper capital markets are needed; for now, we prefer financials, utilities, and healthcare;

UK equities (neutral): Valuations are still attractive relative to the US, but lack short-term catalysts for upside, so we remain neutral.

Japanese equities (overweight): Strong nominal GDP, healthy corporate capex, and governance reforms all favor Japanese stocks.

Chinese equities (neutral): Within the neutral range, we favor tech stocks.

Emerging markets (neutral): Economic resilience has improved, but selectivity remains key. We focus on opportunities related to AI, energy transition, and supply-chain restructuring, such as Mexico, Brazil, and Vietnam.