That's the uncomfortable core of Man Group's 2026 Midyear Outlook, The Ripple Effect. CEO Robyn Grew sets the frame from the opening: "Deglobalisation, or at the very least, the continued discussion about a new world order, is now woven into the texture of 2026." Chief Market Strategist Kristina Hooper then gets to work — mapping what that texture actually looks like. A Middle East war compressing global supply chains. Sovereign debt at historic extremes. Wealth concentration still widening. An AI buildout generating record capital spending without yet generating record returns.
The War the Market Is Choosing to Ignore
The Iran conflict sits at the centre of this report's analysis. The Strait of Hormuz carries critical volumes of crude oil, liquefied natural gas, helium, ammonia, sulfur, and urea. These aren't peripheral inputs. Helium is essential to semiconductor manufacturing. Ammonia and urea anchor global food supply chains. Yet US stocks have climbed since hostilities began.
Hooper identifies a specific and troubling split: "paper-oil prices are looking through this conflict, while spot prices are elevated." The S&P 500 sat near 6,500 at end of March while analyst bottom-up targets reached 8,349. Fitch Ratings warned in late April that EBITDA margins across multiple sectors won't expand the way markets assumed. Man Group's supply-chain arithmetic is stark: for every one day of disruption, three days are required to return to normal. Supply chain stress is already "on par with the COVID-19 pandemic," with the New York Fed's Global Supply Chain Pressure Index at its highest reading since 2022.
Something has to give.
Fiscal Limits Aren't Coming. They're Here.
US national debt has crossed 100% of GDP — a level last reached in the aftermath of World War II. Interest payments are projected to exceed $1 trillion this fiscal year. By 2036, the Congressional Budget Office puts debt-servicing costs at $2.1 trillion. Hooper identifies the compounding trap precisely: the more debt accumulates, the less capacity remains to respond when the next shock arrives. That's not a future risk. It's the current operating condition.
The Brookings Institution's Hutchins Center projects fiscal stimulus turning negative in the third quarter of 2026, becoming more restrictive into 2027. Government spending cuts carry a stronger economic multiplier than tax cuts — meaning the drag from tightening will outpace whatever relief the One Big Beautiful Bill Act delivers.
The Visible Hand Tightens
Industrial policy used to be something emerging markets did. That distinction has eroded. Canada has launched an $18 billion sovereign wealth fund directed at infrastructure and economic decoupling from the US. In America, the interventions keep accumulating: a fee representing 70% of TikTok's valuation charged to its buyers; a 25% levy on Nvidia's China chip revenues; federal equity stakes extracted via redirected grants and loans; executive pressure applied to mortgage markets, defence contractors, and oil companies alike.
Man Group's read on the trajectory is direct. This trend is likely to "continue and accelerate," reducing the attractiveness of US assets to global investors and advancing deglobalisation further.
The P-Shaped Economy
The K-shaped economy — shorthand for widening income inequality — has dominated the conversation for years. Hooper argues the more dangerous problem sits one level deeper. It's wealth, not wages, where the real concentration is happening. The top 1% of US households now hold 37.1% of all assets, the highest share recorded since the Federal Reserve began tracking the data in 1989. A Rand Corporation study found roughly $80 trillion has shifted from the bottom 90% to the top 1% since 1975. With 43% of Americans unable to cover a $1,000 emergency expense, the consumer resilience underpinning US growth is far thinner than the headline numbers suggest.
AI: Record Spending, No Receipts Yet
Grew frames the central tension of the AI story: "the billion-dollar question is: when will they materialise?" Hyperscalers are now directing roughly 30% of revenues toward AI capital expenditure. Amazon is expected to post negative free cash flow in 2026. Moody's puts off-balance-sheet data centre lease commitments at $662 billion across hyperscalers — a figure larger than their total on-balance-sheet debt. The UK Office of Budget Responsibility has flagged the risk of AI-driven job displacement reducing tax receipts if the transition isn't managed carefully. The productivity upside is real in potential. A monetisation timeline is not yet visible.
Five Key Takeaways for Advisors and Investors
- Trim US equity concentration. Eurozone, Japanese, and select Asian emerging market stocks offer better valuations, meaningful fiscal support, and fewer governance overreach risks relative to the US right now.
- Lean into quality over growth. Strong balance sheets and defensive sector positioning are the priority as earnings revision risk builds across oil-exposed and consumer discretionary names.
- Shorten fixed income duration. European credit and shorter-dated paper are preferred as yield curves steepen and US Treasuries face growing questions about their safe-haven status.
- Build a structural alternatives allocation. Multi-strategy, equity market neutral, trend-following, and precious metals each serve differentiated roles across Man Group's three scenarios — and the range of plausible outcomes is genuinely wide.
- The base case is a mild US recession. Man Group assigns 60% probability to this outcome, 15% to stagflation, and 25% to a détente-driven recovery. Every portfolio should be tested against all three.
Footnote:
Grew, Robyn, and Kristina Hooper. Man Global 2026 Midyear Outlook: The Ripple Effect. Man Group, 5 June 2026.
