Originally written by Capital Group
Edited By Gleba and Associates for clarity and brevity
A Market That Keeps Moving Forward
At the halfway point of 2026, global markets have remained surprisingly strong. Despite ongoing conflicts in the Middle East and Ukraine, persistent inflation, rising energy costs, concerns about consumer spending, and questions about an AI-driven market bubble, major stock indexes have continued to reach new highs. According to Capital Group’s Midyear Outlook, this strength is being driven by solid corporate earnings. Many companies are increasing revenue, improving profit margins, and returning cash to shareholders through stock buybacks. These strong business fundamentals have helped support markets even as global risks remain elevated.
AI Is Becoming a Major Economic Force
Artificial intelligence has become one of the most important drivers of economic growth in 2026. Capital Group believes AI related spending is having a meaningful impact on productivity, employment, energy demand, and investment decisions across the global economy. Economist Darrell Spence notes that AI investment is helping offset challenges such as higher energy costs, geopolitical uncertainty, and softer consumer demand. Large investments by companies like Microsoft, Amazon, Alphabet, Meta, and Oracle are benefiting industries ranging from semiconductors and data centers to construction, utilities, and manufacturing.
The report compares today’s AI investment boom to China’s industrial growth after joining the World Trade Organization in 2001. Capital Group estimates that total AI-related investment through 2032 could exceed the scale of that historic expansion, making it one of the most significant economic shifts in decades.
Strong Earnings Continue to Support Stock Markets
While AI is receiving much of the attention, strong earnings growth is also supporting markets. Healthcare companies are benefiting from advances in obesity and diabetes treatments, energy companies continue to profit from higher oil prices, and industrial firms are seeing demand from infrastructure and data center projects.
Capital Group expects particularly strong earnings growth in emerging markets. Companies such as Taiwan Semiconductor Manufacturing Company (TSMC), Samsung Electronics, and SK hynix are benefiting directly from AI-related demand. The report emphasizes that continued earnings growth remains the key factor supporting stock market performance.
Economic Growth Remains Steady
Although global economic growth has slowed slightly, Capital Group expects the overall economy to remain resilient. Current forecasts suggest global GDP growth of about 2.9%, with U.S. growth near 2.1% and European growth around 1.2%.
The U.S. economy continues to benefit from AI related investment and a stable labor market, even as higher energy prices create challenges for consumers and businesses. Europe faces greater pressure from energy costs, but stronger manufacturing activity and supportive government policies may help offset some of the impact. In China, improving housing markets, exports, and corporate profits point to a more stable outlook.
Inflation and the Federal Reserve
Inflation remains an important concern for investors. Higher oil prices, geopolitical tensions, and trade-related pressures continue to keep inflation above central bank targets. However, Capital Group believes underlying inflation trends remain relatively manageable.
The labor market has cooled from the exceptionally strong conditions of recent years but remains healthy overall. This gives the Federal Reserve more flexibility in setting monetary policy. Capital Group expects the Fed to remain patient and believes investors may be overestimating the likelihood of future rate increases.
If economic growth weakens further, the report suggests the Fed may place greater emphasis on supporting employment rather than responding to short-term inflation pressures.
Diversification Is More Important Than Ever
While AI presents significant opportunities, Capital Group warns that stock market gains have become increasingly concentrated in a small number of large technology companies. This creates additional risk for investors who rely heavily on broad market indexes.
The report recommends maintaining diversification across sectors such as healthcare, energy, industrial, and international markets. Many companies outside the technology sector are also benefiting from the AI boom and may offer attractive valuations.
International Markets Are Gaining Momentum
After several years of lagging U.S. stocks, international and emerging markets are becoming more attractive. Lower valuations, stronger earnings growth, and a weaker U.S. dollar have helped boost returns outside the United States. Capital Group highlights companies such as Airbus, ASML, AstraZeneca, Safran, and TSMC as examples of global leaders that could benefit from continued international market strength. The report also points to the “Emergent Seven” group of emerging-market technology companies as key beneficiaries of the AI trend.
Bonds Offer New Opportunities
Capital Group remains positive on bonds as well as stocks. Higher interest rates have improved bond yields, making fixed income more attractive than it was just a few years ago. At the same time, the possibility of future Federal Reserve rate cuts has enhanced the role of bonds as portfolio diversifiers. The firm sees opportunities across investment-grade bonds, high-yield credit, securitized assets, emerging-market debt, and municipal bonds. Municipal bonds stand out because of their tax advantages, strong credit quality, and limited exposure to global geopolitical risks.
Looking Ahead
The main message from Capital Group’s 2026 Midyear Outlook is one of cautious optimism. While geopolitical tensions, inflation concerns, and policy uncertainty remain challenges, the combination of strong corporate earnings, significant AI-related investment, and improving opportunities across global markets provides a positive backdrop for long-term investors. Rather than focusing on short-term headlines, investors may be best served by maintaining diversified portfolios that can benefit from both the ongoing AI transformation and broader opportunities across global stock and bond markets.
Original article link: Outlook | Capital Group
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Gary is a Financial Associate at Gleba & Associates, Inc., joining our team in June 2020. After graduating from Walsh College with a Bachelor’s Degree in Finance in 2013, he began his career at Raymond James Financial Services. He then moved to the world of banking, working as a banker with Chase Private Client and then as an Assistant Vice President, Financial Advisor with PNC Investments. Gary has expertise in all aspects of financial planning including investment management, higher education planning, life insurance, and long-term care insurance needs analysis. When he gets away from the office, he loves to spend time with his wife, Lauren, and two daughters, Hadley and Harper. He enjoys woodworking, boating, summer weekends at the family cottage, spending time outdoors and traveling.
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Moiz is our Financial Associate at Gleba & Associates, Inc., where he began in 2013 after working for Bank of America and Thomson Reuters in various financial roles. In his position, Moiz assists in the research of financial solutions in order to meet client’s needs, conducts client reviews, provides insurance quotes, offers detailed financial plans, and delivers follow-up services to our clients. Before moving to the United States in 2004, Moiz grew up in rural India, where he was raised in a family of entrepreneurs. This allowed him to quickly learn the value of financial investment. Moiz holds a Bachelor of Commerce Degree in Accounting from Gujrat University and a B.B.A. in Management and an MBA from Walsh College of Accountancy and Business Administration, where he was elected as a member of Delta Mu Delta, the International Honor Society in Business Administration in recognition of high scholastic attainment. Moiz enjoys spending time with his wife, Tasneem, son, Taha, and family. He also loves playing tennis and rebuilding computers. His expertise in the areas of banking, mortgage and taxation helps to provide our clients with distinct portfolio advice as well as overall financial direction and growth.