by Jeff Blazek, CFA, Co-CIO, Multi-Asset Strategies, Neuberger Berman
After healthy gains in 2025, there are good reasons why risk markets are off to a strong start in 2026. Earnings growth is running strong, global GDP momentum is improving, most central banks are easing and even sizable geopolitical shocks—most recently in Venezuela—have landed with surprisingly little market impact. In years past, a sudden disruption to a major oil producer in a tighter crude environment might have triggered a material correction in global equities. Today, ample spare capacity and better-balanced energy markets have rendered it closer to a footnote.
Against that backdrop, our overarching message is simple: full speed ahead, but with eyes wide open. We continue to believe investors should not be shy about leaning into risk. This has been our stance for some time, and the mosaic of data, earnings and policy has, so far, validated that view. But “full speed ahead” does not mean “close your eyes and hope.” The right posture is to stay constructive, be explicit about the risks that could challenge the current setup and remain disciplined in how we express risk in portfolios.
Leaning Into Risk
Throughout much of last year, markets continually faced and scaled the quintessential “wall of worry”: tariffs and trade uncertainty, questions around the durability of the AI investment boom, and a steady drumbeat of geopolitical flashpoints. Yet global risk assets have taken these worries and the latest events in stride, seemingly absorbing them with relative ease. We do not view this as irrational complacency.
Importantly, equity strength has been grounded in fundamentals. Most gains in U.S. equities in 2025 were driven by earnings rather than multiple expansion—profits did the heavy lifting.
Policy has been another key pillar. Fiscal and monetary settings are supporting strong real and nominal GDP. As we highlighted in our Solving for 2026 thought leadership, countries are deploying different “cocktails” of fiscal stimulus, industrial policy and AI adoption, driving divergent paths for inflation and central bank policy.
While this has put some economies on different footings, growth overall looks set to pick up pace, inflation is broadly under control, and monetary policy is transitioning into easing mode across most key economies.
This is why we believe investors should be leaning into risk, a stance we have held for a while. Our Asset Allocation Committee (AAC) has been overweight global equities since the second quarter of last year. As of this quarter, it has shifted toward an overweight posture in emerging market equities, complementing longer-standing overweights in emerging market bonds and currencies. The Committee is also slightly underweight U.S. fixed income, and broadly bullish on private markets and commodities—asset classes that, among other drivers, offer scope to capitalize from dislocations and hedge downside risk.
What Could Go Wrong?
While we remain optimistic, we are acutely aware of challenges that could complicate these favourable dynamics and fully expect further shocks, the freshest being the U.S. Department of Justice threatening to bring criminal charges against the Federal Reserve, with news breaking on Sunday. The focus now turns to how markets react to this development.
Together with these type of shocks, further geopolitical flare-ups and possible disruptions among an increasingly divergent mix of monetary and fiscal policies across major economies, we are also watching closely for signs that the pillars of the current favorable regime begin to weaken. In our framework, three channels matter most:
- The consumer: At an aggregate level, consumer spending remains resilient with pockets of softness, particularly among more leveraged or lower-income cohorts. A material deterioration in employment data (last week’s U.S. jobs numbers were mixed, but broadly showed moderate growth and lower unemployment) or real wages that translates into a broad-based pullback in spending would challenge the earnings outlook that underpins today’s equity valuations.
- Credit conditions: Credit remains orderly and access to capital is intact, but a sudden widening (deterioration) in credit spreads sparked by rising defaults, sector-specific stress or a shift in bank lending standards could amplify otherwise manageable shocks and turn volatility into something more persistent. At present, our fixed income teams project reasonable baseline defaults for the next two years, but are diligently watching for signs of growth in leverage that exceed reasonable debt capacity relative to yield and spread.
- AI capex: Many leaders in AI and related infrastructure are established, cash-generative firms. But for those leaning heavily on external capital, a funding squeeze could pressure business models and, by extension, sentiment around growth and innovation more broadly. A broader investor pullback from long-duration growth assets would also slow the transmission of AI’s benefits. Related to credit concerns, there is growing risk that the extent of debt issuance that is funding AI spending could alter the balance of credit supply and demand, effectively “sucking all the oxygen out of the room.”
Any one of these could challenge the assumption that recent shocks can be easily absorbed. A reversal in the disinflation trend or a sharper‑than‑expected slowdown in China would add further complexity.
Full Speed Ahead (Judiciously)
Such a backdrop should, and does, provoke caution. But we would also argue that it is precisely this tension—between visible risks and demonstrated resilience—that creates opportunity. For now, growth is reaccelerating, earnings and balance sheets remain in good health, policy is broadly supportive, and episodes such as Venezuela have so far served more as validation of the system’s ability to absorb shocks than as catalysts for systemic stress. In our view, that still justifies a posture that is constructive, selective and, with appropriate vigilance, full speed ahead.
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