Capital Group's 2026 Midyear Outlook report delves into many market-driving issues, including wars, the AI rollout, inflation, high oil prices and the U.S. midterms. It also identifies key equity and fixed income investment themes. Here we offer an overview of the opportunities as we see them. Be sure to download the full report for a deeper dive.
June 24, 2026
Robust earnings growth may fuel stock market gains
Why does the stock market keep hitting new highs when the world seems to be falling apart? The simple answer: Corporate earnings are on a tear. Consensus earnings estimates are on the rise, particularly in emerging markets where they are expected to grow 49.2% in aggregate this year. This is partially explained by the many companies benefiting from the AI boom, but that’s not the whole story.
"When I look at the market going forward, the key element is this underpinning of strong corporate earnings."
Rob Lovelace
Equity portfolio manager
Earnings growth is expected to rise across several markets
Sources: Capital Group, FactSet, MSCI, S&P Global. Estimated annual earnings growth is represented by the mean industry analyst consensus earnings per share estimates for the year ending December 2026 across the S&P 500 Index (U.S.), the MSCI Europe Index (Europe), the MSCI Japan Index (Japan), the MSCI EM Index (Emerging markets) and the MSCI China Index (China). Earnings growth represented in USD. Estimates are as of May 31, 2026.
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Focus on five key investment themes driving markets at midyear
AI build-out may surpass China’s industrial boom
In the race for AI supremacy, tech giants are making capital investments at a scale and speed on track to surpass China’s industrial boom of the early 2000s. Historic spending by hyperscalers Amazon, Alphabet, Meta, Microsoft and Oracle has translated into soaring demand for semiconductors from the likes of NVIDIA, Broadcom and TSMC.
“AI is potentially the highest impact technology in a generation and the most significant force in the economy.”
Mark Casey
Equity portfolio manager
AI investment is on pace to exceed China’s 10-year industrial boom
Sources: Capital Group, Federal Reserve of St. Louis (FRED), Haver Analytics, National Bureau of Statistics of China. Values are adjusted for inflation using the U.S. Consumer Price Index (CPI) as of March 2026. AI build-out estimates assume annual spending ramps linearly from $0.5T in 2022 to $5.5T in 2032. Cumulative values are estimated using the trapezoidal method, which assumes linear change between observations and sums the average across intervals. Figures presented are for illustrative scale only. As of May 31, 2026.
Get the Midyear Outlook in 5 charts
Focus on five key investment themes driving markets at midyear
Bonds hit a sweet spot for income and diversification
Bonds have reclaimed their role in portfolios, offering stronger return potential and better diversification at a time when investors need both. Higher starting yields can help support returns and buffer volatility even as the war in Iran adds uncertainty and raises inflation concerns.
“The U.S. economy may well remain resilient. Either way, investors can be in high-quality bonds without giving up attractive yield.”
Chitrang Purani
Fixed income portfolio manager
Sources: Capital Group, Bloomberg. As of May 31, 2026. Duration is a measure of a bond’s price sensitivity to interest rate changes, expressed in years. Yield to worst is the lowest possible annualized return an investor could receive, assuming no default and that the bond is called, put or held to maturity. Fed funds target rate reflects upper bound of range. A 60/40 portfolio consists of roughly 60% stocks and 40% bonds. Past results are not predictive of results in future periods.
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