As we approach the end of the year, Bedrock’s Head of Investment Advisory, Helena Eaton, examines the key questions on investors’ minds as we look ahead to 2026**.
While not exhaustive, this article highlights some of the most significant risks and questions on investors minds, providing insights to help you stay informed and navigate what’s to come.
Lofty valuations, complex circular financing arrangements, and extreme capital expenditure (CAPEX) plans – estimated at up to USD 3 trillion over the coming years, with at least half potentially financed by debt* – have caused parallels to be drawn between the current AI hype and the Dot-Com bubble of the early 2000s.
However, the current environment is fundamentally different. The hyperscalers that are at the forefront of AI investment have their valuations underpinned by strong free cash flow and earnings, unlike the largely unprofitable companies of the early 2000s.
The main risk, in our view, lies in possible overinvestment and challenges adequately monetising this. Much will depend upon the widespread rollout and adoption of AI applications and we expect the next couple of years to be crucial in assessing how successful this will be.
We remain constructive about the long-term prospects of AI, but we also believe that investors need to be wary of excess concentration in a relatively narrow sector of the market. Diversifying beyond AI-related U.S. tech into other sectors and regions – particularly those with more reasonable valuations – is a prudent approach.
“Diversifying beyond AI-related U.S. tech into other sectors and regions – particularly those with more reasonable valuations – is a prudent approach.”
Monetary and fiscal stimulus in the U.S., Europe, and Asia is supporting economic growth and fuelling optimism for risk assets. However, excess liquidity and spending could lead to higher inflation, which in turn could force Central Banks to pause cutting interest rates or potentially even consider hiking them. If interest rate expectations shift upwards, it would likely be detrimental for risk assets.
In the U.S., the combination of lower taxes and delayed tariff effects are the key inflation risks. The ongoing debate about the Fed’s independence under its new Chair adds another layer of uncertainty, as political pressure might lead to an even more accommodative Fed, which could exacerbate inflationary pressures longer term.
In the EU, fiscal stimulus is also significant — led by Germany’s planned spending of over €1 trillion, including €500 billion for infrastructure, alongside increased defence budgets across member states. However, falling energy prices and a cautious consumer will likely keep price pressures contained.
Overall, it seems that upside inflation risk is more pronounced in the U.S. than in Europe, though the base case remains for a gradual moderation of price pressures across regions throughout 2026.
“Overall, it seems that upside inflation risk is more pronounced in the U.S. than in Europe, though the base case remains for a gradual moderation of price pressures across regions throughout 2026.”
2025 brought several concerning headlines in private credit, driven by looser covenants, opaque ratings, and illiquidity. The global private credit market has grown rapidly, reaching over USD 3 trillion**. The recent investor survey conducted by the Federal Reserve features private credit among the most important near-term risks to financial stability, as potential negative spillovers may have negative impact on banks in the event of credit stress or failure of a nonbank financial institution.***
Moreover, a large portion of future AI-related CAPEX is expected to be financed through private credit*, increasing sector risks if AI investments fail to deliver returns.
Currently, default rates remain low, and lower U.S. interest rates should ease debt servicing costs.
In our view, issues in private credit have so far been limited in scope and we do not see a meaningful risk of wider contagion. However, investors should remain mindful of the segment’s opaque nature and potential vulnerabilities, particularly in an economic downturn.
“Investors should remain mindful of the segment’s opaque nature and potential vulnerabilities, particularly in an economic downturn.”
The U.S. dollar declined notably in the first half of 2025, with the DXY index down about 9% year-to-date. This negatively impacted returns on U.S. assets for non-U.S. investors and reduced U.S. revenue for European firms.
For example, sterling-based investors saw U.S. equity returns 6% lower, while euro-based investors experienced a 13% drag. This has sparked discussions among European investors about optimal geographic allocation and the importance of currency hedging.
Since May 2025, the dollar has remained relatively rangebound—even after the Fed resumed rate cuts in September—suggesting most depreciation might already be priced in, particularly against G10 currencies.
Nevertheless, non-U.S. investors should review asset allocation and hedging strategies carefully for the year ahead.
“Non-U.S. investors should review asset allocation and hedging strategies carefully for the year ahead.”
Gold is up 63% year-to-date, driven by strong demand from central banks (accumulating since 2022) and private investors attracted by lower interest rates. These drivers are likely to persist into 2026, with some investment banks forecasting gold prices between USD 4,500 and USD 4,900 per troy ounce**** by year-end.
We remain constructive on gold and expect the price to be supported by strong central bank demand, elevated geopolitical tensions, and further easing. However, pullbacks/consolidation also possible given the strength of the rally this year.
Silver has surged 116% year-to-date, to the large extent fuelled by speculative demand, supply constraints, and its perceived role as a “catch-up” trade to gold. The latest rally followed news that the U.S. added silver to its official list of critical minerals and the Reserve Bank of India (RBI) approved silver as eligible collateral for loans. Given these recent announcements the price of silver is likely to be supported from the current levels, although more clarity on the demand resulting from the new RBI collateral rules is needed.
“We remain constructive on gold and expect the price to be supported by strong central bank demand, elevated geopolitical tensions, and further easing.”
Have questions about the themes discussed or how we can help you navigate markets in 2026? Get in touch with us at info@bedrockgroup.com.
References:
*Morgan Stanley estimates $2.9 trillion of global data center spend not inclusive of power investments, through 2028. $1.4 trillion of hyperscaler CAPEX is expected to be funded by free cash flows, while $1.5 trillion by various types of debt, including $800 billion from private capital. “Powering AI: Capital, Power Bottlenecks and Mapping Adoption”, Morgan Stanley, July 24, 2025.
** “Financing the Economy 2024”, Alternative Credit Council, Alternative Investment Management Association (AIMA), https://www.aima.org/compass/insights/private-credit/financing-the-economy-2024.html
*** “Financial Stability Report”, Board of Governors of the Federal Reserve System, November 2025.
**** Forecasts for year-end 2026 gold prices: Goldman Sachs $4,900/toz “Precious Comment: Gold”, Goldman Sachs, November 17, 2025; Morgan Stanley Q4 2026 gold forecast at $4,500/toz “2026 Global Strategy Outlook”, Morgan Stanley, November 2025.
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Past performance is not a reliable indicator of future results.
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