Back to routine: What to expect in 2026 in the markets?

The Christmas holidays are over. Family gatherings, feasts, and days of rest have come to an end. As hard as it may seem, it's time to return to the much-needed routine. The same is true for the markets.

After 2025, the question that lingers in the minds of investors is quite clear: will 2026 be able to maintain the strong tone of the markets after two consecutive years with very high returns? Mapfre AM views the new fiscal year with moderate optimism, although not without risks.

A positive year-end and with no surprises

To know if the good tone of 2025 will continue into 2026, it is important to understand how the previous fiscal year closed. To this end, Ismael García, Deputy Director of Investment Strategy at Mapfre AM, explains that “December was a quiet month for the financial markets, which reached the end of the year with positive returns in practically all assets.”

Short-term doubts about the sustainability of the rallies in companies most closely linked to Artificial Intelligence, together with the traditional year-end profit-taking, led to a rotation toward more cyclical sectors.

Can the bull market continue in 2026?

The big unknown for investors is whether the bull market that started in October 2022 can be sustained in 2026 after two years of double-digit returns. According to Ismael García, “if we analyze the scenario from the four key pillars—macroeconomics, monetary policy, profits, and valuations—everything points to the possibility of having another year of positive returns.”

From the macroeconomic perspective, Mapfre AM anticipates sustained growth, with a possible moderate slowdown, but without a risk of recession. Even somewhat more favorable scenarios cannot be ruled out if fiscal stimulus in Germany materializes or if a potential peace agreement between Russia and Ukraine makes progress.

Inflation remains the main source of risk. “A solid growth backdrop, ambitious fiscal programs, and still-accommodative monetary policy could overheat economies that do not appear to need additional stimulus,” the expert warns.

In monetary policy, the divergence between central banks will be key. The U.S. Federal Reserve and the Bank of England maintain an accommodative bias, the European Central Bank is in a pause phase, and the Bank of Japan may continue raising interest rates. In this context, monetary policy will continue to support markets and facilitate the financing of large public deficits, although it will require active management of duration and yield-curve positioning.

Business profits will grow again at double-digit rates in 2026, driven by a favorable macro environment and the adoption of Artificial Intelligence, which is generating significant productivity gains. The main source of volatility could come from valuations, especially in large technology companies, which carry a very high weighting in the indices. “Any doubts about the monetization of AI could weigh on their share prices,” García notes.

Even so, no bubble levels are observed at Mapfre AM. “Valuations are demanding, but they are supported by solid fundamentals. That said, the potential for further appreciation through the expansion of multiples appears limited,” he notes.

All things considered, the asset manager enters 2026 with a positive outlook on equities and a more cautious stance on fixed income, where the medium- and long-term interest rate trend remains upward. In corporate debt, the strategy will continue to focus on collecting coupon income, as credit spreads remain tight and new debt issuance could increase significantly over the course of the year.

How does Mapfre AM position itself?

In line with this scenario, Mapfre AM has maintained active duration management, despite interest rate ranges having been narrow over the past month. “We have set new levels in the 10-year German bond to increase duration in anticipation of the high volume of issuances expected in January,” explains Ismael García.

In short-term funds and portfolios, the asset manager has added commercial paper offering an additional yield of around 30 basis points over overnight interbank rates. In equities, investment levels are being maintained across both multi-asset funds and portfolios, as, in a low-volatility environment, “it is difficult to reduce risk without a clear catalyst that would justify a more defensive stance.”

Thus, the return to normality in 2026 arrives with a constructive scenario for markets, although it calls for active, selective management and close attention to the main sources of risk that could shape the course of the year.