What’s next for the rest of 2026 and beyond?
Global markets were remarkably resilient in 2025, as moderating inflation, solid earnings and a softer U.S. dollar supported risk assets despite tariffs and geopolitical tensions. Fixed income also delivered, benefiting from tighter credit spreads and then falling yields late in the year.
As we move through the first quarter of 2026, it is a good moment to look ahead and stay focused on the long‑term view. This outlook helps inform our 5‑ to 10‑year return expectations, ensuring portfolio positioning aligns with objectives and keeps clients on track for their goals.
The current investment landscape offers a compelling mix of opportunities and complexities: global equities appear well positioned, supported by resilient earnings, easing inflation and still‑supportive central banks, while fixed income remains attractive given the higher yield environment, with credit fundamentals still sound.
Each year, Scotia Global Asset Management’s Multi‑Asset Management Team (MAT) updates its 10‑year market forecasts to guide the positioning of more than $140 billion* in assets under management, setting forward‑looking risk and return expectations across asset classes. This report presents the latest of those forecasts and explains how they inform our long‑term asset allocation and portfolio positioning decisions.
Key messages
- Our latest long‑term capital market assumptions point to attractive but more balanced return prospects over the next decade, as global growth stays positive and inflation trends lower, allowing for gradual, not aggressive, policy easing.
- Equities are still expected to outpace bonds over the long run across major regions, with Canada and emerging markets toward the higher end of our expected range. U.S. and EAFE markets also remain well positioned for solid long‑term returns, and globally we expect AI‑driven innovation to become more widely reflected across sectors and regions, supporting a diversified equity allocation.
- We continue to favour diversified, actively managed multi‑asset portfolios—using a strategic mix of equities, fixed income and alternatives informed by our long‑term capital market assumptions—as the most effective way to navigate today’s investment environment.
Market outlook
The global backdrop for 2026 is one of steady growth and gradually easing inflation. We expect inflation to stay somewhat sticky near term, then drift back toward central bank targets, allowing for modest policy easing rather than a return to the zero‑rate world.
Equities remain supported by solid balance sheets and productivity gains from AI and automation, even if richer valuations in some areas call for more selective positioning. We view AI as a key medium‑term driver of earnings and capital spending, but acknowledge that related trades are increasingly volatile. That is why we prefer diversified exposure to the broader ecosystem, such as semiconductors, infrastructure, power and data‑centre assets, rather than concentrated bets on a few high‑profile names.
For bonds, this points to a more “normal” environment: policy rates are edging lower, yield curves are adjusting to fiscal dynamics, and attractive income is available without taking excessive duration or credit risk.
While several factors could test the outlook in 2026—including uneven global growth, lingering inflation pressures, and geopolitical or policy surprises that may unsettle markets—for our shorter‑term positioning, we maintain a modest overweight to equities versus a traditional 60/40 benchmark. We believe the expansion can continue as earnings, inflation and interest rates remain broadly supportive, though elevated valuations in both equity and fixed income markets underscore the need for disciplined risk management and broad diversification.
Our long-term view
Our long‑term capital market assumptions (10‑year returns) point to more balanced prospects across equities and fixed income, reflecting a disciplined, research‑driven view of the opportunity set. Our equity return assumptions across major regions tend to sit above the median of other third‑party investment firms, yet remain broadly in line with the wider industry. This reflects a slightly more constructive view on long‑term growth, while remaining grounded in the same underlying capital market drivers that inform most professional forecasts.
Our portfolio return assumptions translate our asset-class outlook into expected 10-year returns for Income, Balanced, Growth, and Maximum Growth portfolios, showing a clear progression in return potential as equity exposure rises. They provide a practical reference point for aligning your objectives and risk tolerance with an appropriate long-term portfolio mix.
Our active approach in a dynamic world
When building a portfolio, investors need both a steady long-term plan and flexibility to adjust when markets shift. Strategic and tactical asset allocation work together, balancing future goals with the realities of changing conditions. Here’s how each plays an important role in your investment journey.
Strategic asset allocation (portfolio construction)
Asset mix is set using 10‑year long‑term capital market assumptions, forming the foundation for diversified portfolios tailored to different investor profiles, from conservative to growth.
Tactical asset allocation (portfolio positioning)
Using 12–18 month views, we make measured, research‑driven tilts around those strategic anchors when valuations, fundamentals or sentiment move meaningfully away from our base case.
A final word
These are our best estimates of where returns are likely to centre, not guarantees—returns for any given asset class could be significantly higher or lower than our expectations over shorter periods. By combining our in‑house views and embedding them in actively managed multi‑asset solutions that we regularly stress‑test across a range of scenarios, we aim to build resilient portfolios that can participate in growth, help protect on the downside, and keep investors on track over the next decade.
For investors planning over the next decade, the message is straightforward: stay confidently invested in a well‑diversified, professionally managed portfolio that blends equities for long‑term growth, fixed income for stability, and alternatives to add an extra layer of diversification and opportunity.