UBS chief investment officer for global family and institutional wealth Maximilian Kunkel said the firm enters the final months of 2026 with a constructive but selective stance on equities, forecasting a broadening rally increasingly underpinned by earnings growth.
For an extended period, market gains have been concentrated in semiconductors and energy, Kunkel noted. Earnings momentum is now spreading across the US and globally, he added, likely driving further improvement in market breadth. Within technology, opportunities exist beyond semiconductors — particularly among hyperscalers — as well as in financials and industrial companies.
"Overall, the data points more toward an upward-revision cycle than a recession," Kunkel said.
On the risk side, Kunkel identified three key factors. A persistent oil-price shock could reverse disinflation and trigger additional rate hikes. A possible disappointment in AI monetisation after a massive investment cycle poses a second threat. Third, fiscal burdens and large volumes of government-bond issuance could keep long-term yields elevated, adding pressure to valuations.
Global growth remains solid, he said, with momentum outside the AI sector strengthening — particularly in manufacturing-heavy eurozone economies, as recent PMI data from the US, Japan, the euro area and Britain indicate. The US continues to outpace Europe, but overall activity outside AI-related sectors is improving.
US equity valuations are undeniably high, limiting room for further multiple expansion, Kunkel acknowledged. However, he offered three mitigating observations. Since the start of the year, the strongest de-rating in a bull market since 2010 has occurred: US corporate earnings growth has significantly outpaced equity price gains, making markets cheaper than at the beginning of 2026. Over a 12-month horizon, earnings growth and interest rates — not valuations — typically drive markets, and both are moving favourably. Additionally, he argued that markets continue to underestimate the scope for further monetary tightening.
"Valuations are not cheap, but the interplay of stronger earnings growth and a less restrictive monetary stance clearly favours equities," he said.
Portfolio positioning focuses on nominal-growth areas while limiting exposure to interim volatility. Structural innovation themes — AI, energy and materials, and longevity — feature prominently alongside cyclical beneficiaries such as financials and industrials. In fixed income, quality bonds complement equity exposure, and commodity holdings can hedge against geopolitical developments and a potential dollar weakness.
Regarding Federal Reserve policy, Kunkel said Kevin Warsh's recent Jackson Hole remarks underscored that inflation remains the central concern and higher rates the primary tool. However, Warsh is not a traditional Fed chair, so his comments should not be read as a concrete policy signal. Kunkel expects further CPI data to show easing inflation and forecasts the Fed will leave rates unchanged.
In fixed income, two-year bonds offer attractive carry and would benefit most if rate expectations cool — a scenario Kunkel prefers. Medium durations also present a favourable risk-return profile in a falling-yield environment. Preferences lean toward high-quality sovereigns and investment-grade bonds, with maturities of two to six years in US dollars and British pounds, and two to ten years in euros and Swiss francs. Maturities beyond ten years are viewed with caution.
Kunkel has served as regional CIO for Germany and Austria since January 2017 and became global CIO for family and institutional wealth in May 2020. He joined UBS as a graduate trainee in 2006.
