The PICTON Report | 2026 Macro Outlook
After the Rush
Recovery broadens as markets rotate beyond early AI favourites
Investment Themes
In 2026, the market looks poised to recover from the period of narrow leadership, extreme concentration and policy uncertainty, as long as bond markets remain cooperative. A more supportive environment for global growth should provide more opportunities for investors who can rotate into winning sectors while looking broadly at diversified return streams to build resilient portfolios. The 2026 PICTON Report unpacks three key themes:
How 2025 Tested Markets Without Breaking Them
In 2025, markets absorbed major policy and political shocks without breaking. Growth held up, volatility stayed low, and AI-driven investment supported risk assets. Beneath the surface, resilience was uneven, with households facing rising costs and affordability pressures despite strong market performance.
Living in a K-Shaped Economy
The economy is living with a clear K-shaped structure. Asset holders and large firms benefit, while labour conditions weaken for lower-income and younger workers. AI boosts productivity but deepens divergence. Policy has turned accommodative despite inflation above target, prioritizing growth support.
Why 2026 Could Reward Rotation and Broadening
The 2026 outlook points toward rotation and broader participation. Extreme concentration is easing as earnings expand beyond mega-caps and global conditions improve. Bond markets remain the key constraint, making diversification and balance sheet discipline critical as opportunities widen across markets.
Team Views
Perspectives on asset classes, asset allocation and portfolio construction.
Quarterly Outlook Series
Quarterly insights from our portfolio managers.
Q1 2026 moved through three distinct market regimes in rapid succession. Each one with different leadership, different risks, and different implications for active management.
We saw sharp swings in government bond yields, widening credit spreads and early signs of stress emerging in parts of the credit market.
Q1 was a rare quarter for multi-strategy. Geopolitical shock, surging oil prices, and broad selling hit equity, credit, and arbitrage strategies at the same time.
The quarter was complex. Volatility, geopolitical instability, and shifting credit conditions tested the opportunity set across mergers, SPACs, and convertible bonds.
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