AI bubble could inflate more before it bursts

We don’t think the AI rally is dead yet, and expect it to last through 2026. That view underpins our forecasts for strong gains in those equity markets most exposed to it, particularly the US and some of those in Asia. Other equity markets, and ‘risky’ assets more broadly, might have less to gain, though. And we don’t think the good times for tech will last forever: we suspect valuations will eventually become sufficiently stretched that a correction is likely. Our base case, though, is that that won’t happen until 2027. Meanwhile, we don’t think the remainders of central bank easing cycles (or a potential bursting of the AI bubble) will prove a big boon to developed market government bonds, especially outside of Europe. Finally, we expect 2026 to be a better year for the US dollar than 2025 has been, although Asian currencies might have a good one too.