Market Know-How 4Q 2026: Yield Ahead

The post-QE regime is likely to produce structurally higher and more volatile yields, making selective multi-asset positioning essential.

• Fiscal expansion, AI investment and resilient labor markets are supporting developed-market growth; the authors’ G4 activity indicator is tracking at 2%, above trend, into year-end.
• Inflation is expected to remain above 3% across most developed markets in the near term, delaying a return to target until at least 2028; the authors expect 1 to 2 further rate hikes by year-end.
• Projected policy rates are 2.75%-3.00% for the ECB, 4.25%-4.50% for the Fed, 4.00%-4.25% for the BoE and 1.50%-1.75% for the BoJ.
• US hyperscalers have raised about $400 billion in US investment-grade corporate debt this year, roughly 20% of gross issuance, while their capex could rise from 1.8% to 2.5%-3.5% of GDP, adding pressure to long-term yields.
• More than 40% of the world’s population and about 50% of global GDP are scheduled to vote in national elections between now and the end of 2027, increasing fiscal and policy uncertainty.

Takeaway: Investors should manage duration actively, diversify curve exposure and consider inflation protection; the preferred positioning is EM equities and EM debt in the base case, with US small caps replacing mega-cap exposure and hedge funds plus private credit helping diversify volatility, while short-duration bonds and high-dividend equities are favored in a stagflationary scenario.