Outlook 2026: Robert Tipp (PGIM)
This text was originally written in Dutch. This is an English translation.
By Robert Tipp, Chief Investment Strategist, PGIM
Where are the biggest opportunities and threats for 2026?
'In most developed markets, everything seems to point to a muddle-through scenario: low to moderate growth with inflation slightly above target, especially at the core level. This supports a potentially prolonged bull market in bonds driven mainly by income, rather than a short bull market fuelled by a rapid decline in yields. In the corporate bond market, spreads may narrow further, albeit to a limited extent.
In addition, the yield curve is likely to steepen further, although long-term interest rates are now following short-term rates and appear to have clearly peaked in the US. This has positive implications for other Western markets, given the influence of the US market on correlations.
In terms of technical factors, despite strong inflows into both equity and bond funds, money market funds remain surprisingly popular. In the third quarter, they swelled by nearly $300 billion. As a result, they not only reached an absolute record, but also historically high levels relative to GDP. All that money in money market funds represents a huge potential source of demand that could shift to equities and fixed income if the return on cash declines.
In summary, the theme of “yield is destiny” is still driven by generous effective yields in the various markets. This theme could even gain momentum if a weakening US economy or a “Fed capture” scenario increases the downward pressure on interest rates.'
All that money in money market funds represents an enormous potential source of demand.