Julius Baer says tactical 2026 beats buy-and-hold as paths diverge

Outlook pairs short-dated high-yield with longer investment-grade bonds, and favours European cyclicals and Swiss shares.

Julius Baer said 2026 is likely to favour tactical, globally diversified portfolios rather than static buy-and-hold strategies, as policy paths and growth drivers continue to diverge across major economies.

In its Market Outlook 2026 titled “Reset, rebalance, go global”, the private bank said real global growth is expected to be around 3%, led by emerging markets.

It described the US as shifting towards investment- and credit-driven momentum, supported by interest-rate cuts and continued spending on artificial intelligence, whilst Europe is leaning more heavily on fiscal stimulus, particularly in infrastructure and defence.

China, it said, faces deflationary pressures but continues to show strength in strategic sectors as it pursues greater self-sufficiency. Julius Baer added that the US dollar remains overvalued.

In fixed income, the bank recommended an income-focused “barbell” strategy combining short-dated high-yield corporate bonds with slightly longer-duration, high-quality investment-grade bonds.

It also sees selective opportunities in emerging market hard-currency corporate bonds. Overweight positions highlighted include US dollar BBB credit, euro-denominated investment-grade bonds, Eurozone peripheral government bonds, and EM hard-currency corporates.

On equities, Julius Baer said it remains constructive but warned against concentration risks, particularly in AI-heavy US markets.

It encouraged broader geographic and sector diversification, highlighting European cyclicals, Swiss equities as a core allocation, and Asia as its preferred emerging market region.

Within Asia, it said India is overweight and reiterated a conviction call on China, whilst also expressing positive views on Japan and Singapore. Global healthcare was flagged as a defensive diversifier, alongside high-dividend and low-volatility stocks.

In currencies, the bank expects the US dollar to weaken over time and favours diversification into the euro and selected European currencies. It highlighted the Swiss franc as a preferred haven and described the Singapore dollar as a relatively stable currency in risk-off periods.

Julius Baer said gold remains an important hedge, supported by structural central bank demand and safe-haven flows, although it cautioned that speculative activity could increase volatility.

In alternatives, it pointed to diversification opportunities in private equity, private credit–  particularly sponsor-backed senior secured direct lending in Europe– private infrastructure such as data centres and power generation, and market-neutral hedge funds.

On digital assets, the bank noted strong inflows in 2025 and said macro factors are likely to remain the key driver in early 2026. Looser US liquidity and a potentially weaker dollar could be supportive, although volatility is expected to remain elevated.