T. Rowe Price's global leaders on 2025's biggest surprises and whether they're bullish or bearish on 2026

It's been a rollercoaster year for investors of all stripes, and many of us have spent a lot of time trying to wrap our heads around a new "new normal" on what seems like a weekly basis.

But how have the pros seen it, and what are they seeing as the prospects for next year? 

On a recent webinar panel for T. Rowe Price's global market outlook for 2026, Ken Orchard, Head of International Fixed Income, Sébastien Page, Head of Global Multi-Asset and CIO, and David Giroux, Head of Investment Strategy and CIO, all offered their thoughts on the biggest shocks from this year and where they're seeing the opportunities in the next.

2025's big surprises

For Sébastien Page, it's not any of the big extant developments - tariffs, AI, bubble talk - that has shocked him the most in 2025, but rather, how the market managed to handle them all.

"The market’s resilience has surprised me," he said. 

"I like to do this thought experiment where I ask people, 'Imagine that we’re in February 2022, and you short the stock market. And you fall into a coma. And then I usually go, OK, I wake you up today, and you ask me what’s happened since February of 2022 - Russia invaded Ukraine; we had 550 basis points of Fed hikes; 9% inflation; we had the number two, number three, number four biggest bank failures in history; a war in the Middle East; and now the highest tariffs in 80 years. And guess what? The market is up 57%.'

For David Giroux, the most interesting surprise has been equities overvaluations - but not where you'd expect. While the Mag 7 dominated the headlines and drove many of the concerns all year, they aren't necessarily overpriced.

"I think when you look at a lot of companies in the AI ecosystem, or Mag 7 - Meta, Google, Amazon, Microsoft - all very, very reasonably-valued companies today relative to their growth rates."

"What has really not been reported and really not discussed a lot is the 300 companies in the market that are not under secular decline. They’re not part of the AI trade, and their valuations are about 15% to 20% higher than the rest of the market."

"This is GE trading at 45 times earnings. This is Walmart trading for 35 times earnings. This is Costco trading for 45 times earnings. This is Goldman Sachs trading for 2.5 times book value. That underlying part of the market - 6% of the S&P 500 trading for very high valuations versus history, that's a part of the story that has really not been told very much."

For Ken Orchard, there were two big surprises. 

"First of all, it is the big decline in realised and applied volatility this year, with all of the macroeconomic noise. We had expected there to be a lot of policy surprises, geopolitical surprises, et cetera. We got those, and yet the market just kept going down."

"The second surprise is somewhat related, and it’s that we had so many central bank rate cuts, particularly the Fed cutting rates with core inflation over 3%. It’s been above their mandate for four years in a row now. Unemployment is at only 4.3%."

"Historically, that’s quite low, too, and the Fed cutting - that was a big surprise to me. I did not expect that, and I think that’s part of the reason why we’ve seen volatility decline so much."

Bullish or bearish on 2026

On the outlook for fixed income next year, Orchard says the overall picture is positive, with some potential casualties. 

"I’m bullish on the macroeconomic outlook," says Orchard. "I’m bearish on bonds, on interest rates, and if I have to be bearish on something, then I’m bearish on government bonds."

"I’m bullish on the macroeconomic regime, and the fact is, we have a great setup coming into the year. We’ve had central bank cutting rates. Financial conditions are relatively easy. We have multiple governments around the world doing fiscal stimulus - U.S., Germany, Japan. 

"And we’ve got energy prices that are relatively low. We don’t see any big imbalances in the economy at this point, and so it’s quite a positive setup going into next year."

On equities, Giroux tries to look further ahead, and sees modest performance as the likely course for stocks over the next few years. 

"Honestly, I have no idea how 2026 is going to play out," he said. "We tend to take a five-year view. I think trying to predict what the market’s going to do in a one week or one month or even one year is very, very difficult."

"But on a five-year view, when we look at the equity market, we think returns in the equity market will be slightly below average. Our weighted-average expected return for the market is about 7%, which, again, is probably a little bit below average. So below average, but not a horrible outcome."

For Page, it's a mixed bag as a multi-asset investor. 

"I’m just going to combine the two views. I’m going to say I’m bullish on the macro, cautious on the valuations. Is that fair? The Asset Allocation Committee is neutral between stocks and bonds, so that’s where I am."

The biggest risk and biggest opportunity going forward

In terms of risks and opportunities, Page says it's asymmetry in markets that is the source of both. 

"Our head of fixed income, Arif Husain, said recently, no, we’re not in a bubble. We’re in a balloon. And I think his point was you can inflate the balloon more than a bubble. Maybe it’s semantics. But what’s keeping me up at night is the asymmetry in market opportunities, given where we are, where it’s starting to feel balloonish or bubblish."

"I think of asymmetry a lot. I want to participate, we want to participate. So I like, for example, hedged equity strategies, where you get a portion of the upside, but you’re actually hedging the downside." 

"From an asset allocation perspective, I think those strategies are interesting. So I think this will be my takeaway: 2026, position for asymmetry."

Orchard says there's not obvious big risk in fixed income, and even sustained inflation could present opportunities. 

"There’s not very much that’s really worrying me right now. Perhaps I’m worried a little bit if the Fed doesn’t cut in December, January, that that could be taken out of the market, because the market’s expecting it, but ultimately, don’t think it really matters that much." 

"What we are thinking about for next year is we want to have lots of short-duration credit, so things like loans, as we talked about, but also short-duration securitised credit, we think, is attractive."

"We want to be outside of the U.S., we want things like emerging markets, and we also want to be long inflation. So, TIPS in the U.S., but also inflation-linkers in Europe, Japan. Those are still priced at a fairly low rate of inflation around the world, and so they do offer some attractive upside. If inflation just stays at the current levels, then they will do well."

 Finally, Giroux says there are plenty of left field trades offering potential.

"There’s a variety of idiosyncratic, really attractive investment opportunities that we think can generate mid- to high-teens returns. We’ve talked about publicly in the past that utilities are still today trading at a discount to staples."

"I always tell people, one of the easiest trades to do in the market, one of the easiest arbitrages, is to go long utilities. The right utilities in the right states who benefit from AI, whose growth rates used to be 5% now are 7%, 8%, 9%, in some cases even double digits, with, in some cases, 2% to 3% dividend yields, that are trading at a discount to the market, with very little FX risk, very little regulatory risk."

"That is a really attractive place. And underweight staples, who have a variety of headwinds, from a weak consumer at the low end, which may be structural over time."

But ultimately, his message for investors is to ignore the macro noise, even in a year as eventful as this one. 

"There’s nothing I would highlight that I’m spending any time on, on a macro perspective. I’m very, very focused on the micro."