We think the AI rally is approaching its last stage, but is probably not quite over yet. Accordingly, we expect the tech-heavy equity markets, such as those in the US, Korea, and Taiwan, to continue to outperform over the remainder of this year. But we expect them to fall, in some cases quite sharply, next year. The outlook is a bit more mixed elsewhere: because we expect the Fed to raise its policy rate later this year, we don’t expect a big rally in Treasuries, even once equities start to struggle in earnest. Bonds in Europe could fare better as central banks in that region turn more dovish, contrary to what money markets currently discount. That combination, in our view, will keep the US dollar on the front foot in the second half of 2026. But we suspect that a peak in the US stock market, and perhaps US exceptionalism more broadly, will eventually put downward pressure on the greenback as well.
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