Are Bonds Set to Outperform Equities in 2026?

With valuations in the US markets (S&P 500 and Nasdaq) running ahead of fundamentals, the risk of an economic slowdown or mild recession is rising — driven by high debt levels, excessive liquidity printing, and the potential onset of stagflation. The yield curve inversion, where short-term (3-month) yields are riskier than long-term ones, signals caution.

Historically, bonds have performed well during rate-cut phases and market downturns, offering stability and double-digit returns when interest rates fall. Given this setup, we prefer to shift part of the portfolio toward bonds, precious metals, and select emerging markets, while reducing equity exposure, as 2026 is unlikely to be a strong year for global equities.