Positioning for global synchronization

Global resync is a short phrase with substantial implications. We believe a synchronized global economic expansion is unfolding as we head into 2026, which is a highly positive development for investors with globally diversified portfolios.

Consider performance during the last genuine global resync in 2017, when the 20%-plus returns delivered by U.S. equities were outpaced by international developed markets, while emerging market equities handily outperformed both. We’ve already seen international markets assume the lead in 2025 amid stabilizing economic conditions after years of weakness, which we believe should be followed by an upward inflection in growth.

We see a solid foundation offered by the U.S.—steady growth, improving policy clarity and strong corporate fundamentals—as a key enabler of the emerging global resync. Overseas, momentum is rebuilding after years of U.S. leadership. A return to more normal inflation levels offers the global economy the potential to fire on all cylinders in 2026. With the U.S. steady and the rest of the world on a healthy growth trajectory, we see leadership continuing to broaden in global equities in a similar manner to the broadening we expect within the U.S. equity market.

Global growth and policy move into alignment

Major economies currently share many of the key ingredients required for sustainable economic growth:

• Inflation is stable and slowly returning to target from elevated levels
• As a result, global central banks have been able to gradually loosen monetary policy and lower rates
• Fiscal policy has also served as a source of economic stimulus—though in region-specific forms
• Cyclical momentum is returning, which can be observed in capital spending, industrial activity and the performance of small- and mid-cap stocks, which tend to be more interest-rate sensitive

Together, these factors could drive renewed risk appetite and power a global secular bull market. Trade and tariff frictions continue to linger, and they will likely impact economic activity. However, the reality has been far more favorable than the worst-case outcomes feared in early 2025 and they will not likely be a major impediment to sustainable growth.

Quarterly figures from January 1, 2023 to December 31, 2027 with estimates beginning July 1, 2025. Source: Bloomberg

At the corporate level, companies are defending margins through cost control and efficiency gains. Fiscal policy is slated to contribute $1 trillion to the eurozone over the coming decade. We believe cyclical sectors should be supported by wage growth and stable credit conditions.

Japan: Reforms and resilience

Japan remains a leader in global equity performance through a rare blend of reform- and growth-driven momentum. A heavy policy focus on corporate governance appears set to continue under the leadership of Prime Minister Sanae Takaichi. Her overt commitment to continuing Abenomics should mean the three arrows—expansionary monetary policy, flexible fiscal policy and corporate reform—will remain top policy priorities.

Exhibit 2: Japanese share buybacks as a proxy for commitment to corporate governance reform

Monthly figures from January 1, 2018 to November 18, 2025. Source: Bank of America

Exhibit 3: Profitability measures continue to inflect higher

Daily figures from January 1, 2016 to November 25, 2025. Data references TOPIX 12-month forward estimates. Source: Bloomberg

Wage growth and reflation trends are improving household confidence, even as inflation moderates. We expect corporate governance and buybacks to continue lifting returns on equity, while earnings expectations for fiscal-year 2026 are rising against a backdrop of a weaker yen. A government commitment to digital transformation will likely be favorable for the AI hardware, automation and clean energy industries.

China: Selective recovery amid transition

China remains volatile but may find its footing via policy-led growth after years of structural strain. We see signs of reflation taking hold, though the property sector remains an obstacle. Whether 2026 is the year that housing finds a durable bottom depends on policy support, in our view. We expect more stimulus coming down the pipeline in the new year, offering more support at the corporate and consumer levels.

Exhibit 4: China’s property sector may have bottomed. Will it hold?
 

Monthly figures from January 1, 2011 to August 31, 2025. Property prices reference the China 70 Cities Newly Built Commercial Residential Buildings Index. Source: Macrobond

Economic growth is stabilizing, with third-quarter 2025 GDP up 4.8% year-over-year and industrial output exceeding expectations. Taken together with easing tariff concerns, there’s sufficient reason for confidence. Beijing’s policy priorities have shifted toward technology, consumption and domestic resilience, favoring a selective focus on policy-aligned sectors like advanced manufacturing, renewables, consumer tech and AI.

Positioning for a global resync

The alignment of major economies in terms of growth, policy and corporate profitability should propel the next stage of the secular bull market. What began as a U.S.-led expansion now appears more broadly distributed across regions and sectors. In our view, international equity markets now offer a compelling combination of appealing relative valuations, the groundwork for a sustainable earnings recovery and solid monetary and fiscal policy support. 

We believe investors should always seek to build multi-region exposure through breadth and balance. Today, cyclical and rate-sensitive areas of the market may stand to benefit from the early innings of an apparent multi-year global growth cycle. These are areas that have been depressed in recent years but may now find firmer footing.