December 17, 2025
US economic resilience has been a multi-year theme, including 2025 when the economy kept growing amid the largest tariff implementation since the 1930s. Growth has aided corporate profitability, and that strong fundamental backdrop has buoyed markets, with equities trading around all-time highs and corporate bonds experiencing historically tight spread levels.
Strong fundamentals are expected by the market in 2026, driven by consumer spending and AI investments. Market participants can't help but opine on the multi-year outlook for AI and its potential ramifications for productivity, the workplace and our daily lives. However, while we don't lose sight of the long-term at PPM, our bottom-up focus behooves us to acknowledge already rich valuations and that 2026 could bring headwinds to market technicals.
AI firms will likely issue in public investment grade, private investment grade, high yield, bank loan and private equity, with implications for other asset classes such as emerging market debt. Add in uncertainty around tariffs, the changing makeup of the Federal Reserve and still sticky inflation, and we believe investors will benefit from a fundamental, research-focused approach. This environment should provide attractive investment opportunities but with the potential for increased risk that will require managers to remain disciplined and tactical.
Unless otherwise stated, the information presented has been prepared from market observations and other sources believed in good faith to be reliable. Information and opinions expressed by PPM are current as of the date indicated and are subject to change without notice. Forward-looking statements are subject to uncertainties that could cause actual developments and results to differ materially from the expectations expressed.
Past performance is no guarantee of future results. Investments involve varying degrees of risk and may lose value.
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