Anastassios Frangulidis, Head of Multi Asset Switzerland, Pictet Asset Management:

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Valuations of U.S. equities, especially technology stocks, are high. Unlike during the late-1990s TMT bubble, these companies have posted strong earnings growth in recent years – yet their share prices have risen even faster. As the U.S. market dominates major global equity indices, global equities also appear highly valued. This is likely to result in below-average performance for U.S. and global equities over the next five to ten years.

That need not be the case for next year, however. As long as the U.S. economy and corporate earnings continue to grow moderately and the Federal Reserve is able to ease policy, valuations are unlikely to correct meaningfully, and equity prices could continue to rise.

«This is likely to result in below-average performance for U.S. and global equities over the next five to ten years.»

Many investors anticipate this and maintain high equity allocations. That makes sense in principle. But if the U.S. economy were to slip into recession or inflation were to rise sharply during 2026, any correction in equities could be sharper than in periods of «normal»« valuations.

Beyond uncertainties around U.S. tariffs, the labor market poses an additional risk. Should the U.S. economy accelerate noticeably in 2026, labor supply could become too tight due to restrictive immigration policy, complicating inflation control – with consequences for monetary policy and markets.

Read next: Philipp Lisibach, Head of Investment Strategy & Themes, LGT Private Banking.