Most of the Market Outlook pieces I’ve seen so far in 2026 have been, to a greater or lesser extent, positive.
Investment managers usually are.
Sometimes the views will be somewhat nuanced, stressing volatility risks or focussing on longer term market prospects, but it would be rare for an investment outlook piece to start with “Run for the Hills!” or such-like.
And it looks like investment managers have put your money where their mouth is. According to the Bank of America Fund Manager survey – they’re all in.
In the January survey, fund managers’ willingness to take on risk (even after a very strong year) has increased. Investor sentiment is at its highest since July 2021. It’s actually around the highest we’ve seen in the survey’s history. One observation I’d make is that it rarely stays there for long.
Most managers expect stronger global growth over the next 12 months – again the highest since mid 2021 and very few are forecasting a recession.
So practically all the money is invested. Cash levels in portfolios are just above 3%. This is the lowest ever in the 25-year history of the survey. The average is just below 5%.
And caution isn’t playing a huge role in their thinking – risk protection is unusually low. The highest share since 2018 report having no hedges in place against a sharp equity drawdown.
So fund managers are a very enthusiastic (and committed) bunch.
This isn’t necessarily a good thing.
And moreover, this bullishness is in sharp contrast to how a lot of us are feeling today.
Take consumers. In the US, Consumer Confidence has collapsed to its lowest point since 2014, surpassing pandemic depths. Here in Ireland confidence is also low. The most recent reading from the Credit Union Consumer Confidence survey is 14% lower than its level one year ago.
Uncertainty around economic policy is also pushing to new high levels. This is clear from the various indices on policy uncertainty. We can also see it in what’s happening to the Gold price – often seen as a safe haven which things look rocky.
There are many factors driving Gold’s gains. Speculative trading, retail and central bank demand, and geopolitical risks are all contributing to its rise. Fear around any inflation boost that we might see from tariffs or interest rates driven too low, also play a role, but in no way can justify the surge we’ve seen.
To be constructive on markets, you build a case around economic growth, higher profits and low interest rates. Throw in a bit of AI productivity, if you like that sort of thing.
The issue is around how much of that is already in the price.
The fact that share prices are reacting very poorly when earnings disappoint points to already high and built-in expectations. It leave little room for disappointment,
When you throw in things like a new Fed Chairman, a very reactive US President, re-emerging inflation or forever expanding fiscal deficits, the outlook gets even muddier.
Markets and managers are optimistic. Individually we feel less secure both financially and in a more general sense.
Wall Street and Main Street seem very far apart.
Tradewinds 