Fidelity: Global Asset Allocation Insights - July 2026

Our Multi Asset team's views on which asset classes and markets are presenting the greatest opportunities and risks.

What has changed?

Energy shock fading: Markets are increasingly looking beyond the Iran conflict as the outlook shifts back towards resilient earnings and growth.
More constructive on the US dollar: We have moved overweight tactically, reflecting resilient US growth, stronger relative fundamentals, and fading expectations for near-term policy easing after Kevin Warsh’s first FOMC meeting as chair.

What has stayed the same?

Growth remains resilient: AI investment, earnings strength, and fiscal support continue to underpin the global expansion.
Equities preferred to credit: Tight spreads continue to limit the attractiveness of credit despite resilient corporate fundamentals.
Geopolitical fragmentation remains a structural theme: Policy divergence and energy security continue to drive regional dispersion.

What are we watching?

Energy market: Whether easing supply disruption allows inflation pressure to continue moderating.
Central bank policy: Whether developments in the Iran conflict allows inflation pressure to ease enough for central banks to become more dovish again.
AI investment and earnings: Whether strong earnings momentum continues to broaden beyond the largest technology companies.

Source: Fidelity International, June 2026. Views reflect a typical time horizon of 12–18 months and provide a broad starting point for asset allocation decisions. However, they do not reflect current positions for investment strategies, which will be implemented according to specific objectives and parameters.

Cycle gauges

Source: Fidelity International, June 2026.

		Snapshot of views
Equities	Equities	Strong earnings, resilient growth, and continued AI investment support a constructive stance, but we are mindful of risks.
	US	AI-led investment and robust earnings continue to support the market, although elevated valuations and concentrated leadership temper upside potential.
	Europe	Weak external demand and softer earnings and higher energy costs remain headwinds.
	UK	Attractive valuations and defensive characteristics offset a subdued domestic outlook.
	Japan	Corporate reforms, improving profitability, and resilient earnings continue to support the market.
	Emerging markets	Attractive valuations and improving earnings momentum continue to support selective opportunities.
	Asia Pacific ex. Japan	AI-related earnings are improving, though Australia continues to weigh on the region.

Key views

Japan remains a conviction overweight: Corporate reform, rising shareholder returns, and resilient earnings continue to support Japanese equities, particularly domestically focused companies.
Remain underweight Europe: Germany's fiscal expansion improves the medium-term outlook, but weak earnings momentum, soft macro data, and persistent energy vulnerability continue to weigh on the region.
US earnings remain resilient: AI investment continues to support earnings growth, although elevated valuations and concentrated leadership favour targeted thematic exposure over broad market exposure.
Select emerging markets still attractive: In particular, Korea, Taiwan, and China tech continue to offer attractive opportunities supported by AI, structural reforms, and improving earnings momentum.

Recent data supports Japan’s reflation arc

		– –	+	Snapshot of views
Credit	Credit	à		Spreads continue to offer limited compensation for risk, although balance sheets continue to display strength, resulting in a less negative overall view.
	Investment grade			Tight spreads continue to limit expected returns, although corporate balance sheets remain strong.
	High yield		ß	Carry remains attractive, but tighter spreads reduce the potential for further outperformance, making high yield primarily an income opportunity.
	Emerging market debt			Stable fundamentals but tighter spreads reduce relative value in a more uncertain global backdrop.

Key views

Overall view less negative: Corporate fundamentals remain resilient and default expectations are still low, although spreads continue to offer limited compensation for macro and valuation risks.
High yield moved down to neutral: Attractive carry continues to underpin returns, but tighter spreads and a more balanced risk-reward profile reduce our conviction.
Investment grade still offers limited expected return: Strong balance sheets and healthy corporate fundamentals support the asset class, but valuations remain expensive and leave only modest return potential.

IG yields becoming less attractive even as spreads stay tight

		Snapshot of views
Government bonds	Government bonds	Moderating inflation pressures and resilient growth support a balanced duration outlook.
	US Treasuries	Fed cuts have been priced out as growth and inflation data remain firm, although yield levels relatively attractive.
	Euro core (Bund)	Softer growth supports Bunds, though inflation and fiscal risks limit conviction.
	UK Gilts	Weakening growth and falling inflationary pressure continue to support Gilts.
	Japanese gov. bonds	Policy normalisation and stronger inflation are offset by more attractive yields, leaving us neutral overall.
	Emerging market gov. bonds (local)	Real yields are more attractive outside Asia; a stronger dollar would be a headwind.

Key views

Remain constructive on Gilts: Weakening UK growth, improving disinflation, and relatively attractive valuations continue to make Gilts one of our preferred developed market duration exposures.
Neutral on Japanese government bonds: The Bank of Japan is expected to continue gradually raising rates as wage growth and domestic inflation strengthen. However, after a significant rise in yields, valuations now better reflect these risks, leaving us balanced overall.
Prefer selected EM local markets: High real yields, credible central banks, and supportive domestic fundamentals continue to create attractive opportunities across a number of local currency markets.

Fed pricing becoming more hawkish on strong data, while markets elsewhere see some relief as Iran conflict moves into next phase

		=	Snapshot of views
Cash, currencies, & gold	Cash		Cash at neutral.
	US dollar	à	Resilient US growth, relatively high yields, and a more hawkish policy outlook provide near-term support for the dollar.
	Euro		Weak earnings momentum and slower growth weigh on the outlook; we have a negative bias.
	Japanese yen		Policy normalisation and attractive valuations are balanced by higher domestic yields and ongoing fiscal uncertainty.
	Sterling	ß	Political uncertainty and a weak domestic backdrop weigh on sterling. We expect the BoE to be more dovish than current market pricing.
	Emerging markets FX		High carry and commodity support offset by divergence driven by energy exposure and external risks.
	Gold		Long-term support from central bank buying and policy uncertainty remains, but near-term momentum is more balanced.

Key views

Move overweight US dollar: Resilient US growth, higher relative yields, and reduced expectations for near-term Fed easing provide stronger support for the dollar.
Sterling downgraded: Softer growth, weaker economic momentum, and a less supportive policy backdrop have led us to become more cautious.
A more balanced near-term outlook for Gold: Central bank buying, policy uncertainty, and a more fragmented geopolitical backdrop continue to provide long-term support despite more balanced near-term price momentum. We continue to see gold as a strategic diversifier.

Room for real yields to be more supportive of USD as Fed turns more hawkish

OTHER TAA VIEWS

AI infrastructure: We continue to favour investment themes linked to AI infrastructure, including grid upgrades, power demand, and selected semiconductor supply chains, where sustained capital investment and rising electricity demand continue to provide long-term structural support.
Transition materials: We remain constructive on transition materials, particularly copper, supported by long-term demand from electrification, reshoring, AI infrastructure, and ongoing investment in energy security despite near-term cyclical volatility.
Korea and Taiwan AI ecosystem: We continue to favour exposure across the AI value chain through Korea and Taiwan, supported by strong earnings momentum, memory demand, and continued investment in advanced semiconductor capacity.
European defence: Rising defence spending and greater policy commitment continue to provide a supportive backdrop for the sector despite its recent strong performance.

Manufacturing PMIs are increasingly supportive of industrial metals

Best ideas for investment outcomes

Growth

Japan and EM equities preferred, particularly Korea, Taiwan, and China tech, supported by structural tailwinds, earnings momentum, and attractive valuations.
Thematic equities related to AI infrastructure, grid upgrades, and electrification remain supported by strong investment and long-term demand.

Income

Emerging market bonds in select local markets continue to look attractive given elevated yields and commodity-exporting fundamentals.
Quality income equities provide relative defensiveness and stability, particularly in an environment of higher uncertainty. Dividend growth and strong balance sheets remain key filters.

Capital preservation

Gold remains a medium-term diversifier; however its behaviour has been less consistent as a hedge during the recent volatility.
We remain positive on selected real assets, particularly transition materials such as copper, supported by structural demand from electrification, reshoring, and AI demand.

Uncorrelated returns

Absolute return strategies, driven by active investment decisions and incorporating idiosyncratic sources of risk – particularly those with a focus on tail risk mitigation.

Global Asset Allocation Insights - July (PDF)

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