Our multi-asset investment views – February 2026
At first glance, our baseline scenario has moved closer to a “Goldilocks” environment, characterised by resilient growth and moderating inflation. However, we continue to see risks tilted toward inflation. Labour market conditions remain solid, the economy is running above potential, and a dovish-leaning Federal Reserve (Fed) combined with sizeable fiscal stimulus points to a reflationary backdrop. The nomination of Kevin Warsh as the next Fed Chair introduces uncertainty, particularly around the future path of the Fed’s balance sheet. While this raises legitimate medium-term questions, we believe it is too early to draw firm conclusions regarding either the direction of policy or the feasibility of executing a more aggressive balance sheet strategy.
With recession risk low, inflation contained - at least in the near term - and corporate earnings continuing to drive returns, our default position remains constructive on equities. We are shifting the expression of our US overweight away from mega-cap growth and toward broader and more cyclical exposures - such as industrials and financials - that benefit from a strong US growth environment. We also favour Value outside the US, particularly in Europe and Japan, where valuations remain more compelling and earnings sensitivity to global reflation is attractive.
This month, we re-entered a long position in broad commodities, which we expect to be primarily driven by higher oil prices and firmer industrial metals. This allocation should perform well in either a supply-driven shock scenario or in an overheating economy. We remain long gold despite recent volatility, as we expect continued structural demand from emerging market central banks and see it as an important diversifier against fiscal and geopolitical risks.
We maintain our bias towards short duration (i.e. shorter maturity) bonds, reflecting our above-consensus growth outlook and the potential balance sheet risks associated with a Warsh-led Fed. At the same time, we acknowledge that his nomination may reduce the perceived risk of a loss of Fed independence and could alleviate pressure on the US dollar in the near term. While we continue to believe that the medium-term de-dollarisation trend remains intact, we have neutralised our long EUR/USD position as many of our existing exposures - such as emerging market local debt, gold and commodities - would already benefit from renewed USD weakness.
In conclusion, we believe the macroeconomic backdrop remains supportive for risk assets, although valuations and concentration risks are increasingly challenging. We maintain a preference for equities. We are managing inflationary and fiscal risks through allocations to gold, commodities and an underweight position in US Treasuries.
🟢 Long / positive
🟡 Neutral
🔴 Short / negative
🔼 Up from last month
🔽 Down from last month
Main Asset Classes
🟢 Equities
We remain positive on equities, supported by strong earnings, accommodative policy and resilient labour markets, although concentration and elevated valuations in US mega-cap growth stocks remain risks.
🔴 Government bonds
We remain negative on government bonds. Central banks are expected to cut rates despite growth being revised higher, meaning inflation risks remain skewed to the upside, with additional uncertainty around future Fed balance sheet policy.
🟢🔼 Commodities
We are moving back to a positive view on broad commodities, supported primarily by expected further appreciation in oil prices and firmer industrial metal prices.
🟡 Corporate bonds (credit)
We retain a neutral view on credit. Spreads remain tight and valuations leave limited room for any deterioration in earnings, although resilient growth and healthy bank balance sheets remain supportive.
Equities
🟢 US
We remain positive on US growth and aim to maximise broad exposure to US equities while reducing mega-cap concentration.
🟡 UK
We maintain a cautious stance on UK equities, as recent softness in growth and renewed political uncertainty may continue to weigh on sentiment.
🟡 Europe ex UK
We remain neutral for now although European equities are being supported by signs of accelerating fiscal activity, particularly in Germany, alongside a gradually improving regional environment.
🟡 Japan
Japan’s equity outlook reflects expectations of additional fiscal support following the recent election, which may help underpin domestic activity.
🟡 Global Emerging Markets (EM)1
Strong global demand and looser financial conditions are supportive, though inflation and fiscal sustainability risks create uneven outcomes. We remain neutral.
🟡 Asia ex-Japan: China
China’s equity outlook remains balanced, with limited near term catalysts and a modest role within broader EM positioning.
🟡 EM Asia ex China
Export-oriented Asian markets benefit from US strength and industrial resilience, with relatively fewer geopolitical worries than China.
1Global Emerging Markets includes Central and Eastern Europe, Latin America, and Asia.
Government bonds
🔴 US
We remain negative on US Treasuries. Growth has been revised higher and recession risk remains low, while inflation risks are tilted to the upside. In addition, uncertainty around a potential shift in Fed balance sheet policy under Warsh adds medium-term liquidity risk.
🟡 UK
We are neutral on UK gilts. While the Bank of England is expected to cut rates amid a window of disinflation, weakening growth and rising political risk temper conviction. The near-term policy backdrop is supportive, but medium-term inflation risks remain.
🟡 Europe
We retain a neutral stance on Bunds. Although inflation has eased in the near term, the stronger growth backdrop and expectations for European Central Bank tightening next year limit upside. Fiscal expectations, particularly in Germany, also warrant caution.
🟡 Japan
We remain neutral on Japanese government bonds. While fiscal expansion remains supportive of growth, policy normalisation dynamics and global reflation risks reduce their appeal at current levels.
🟡 US inflation-linked bonds
While inflation is moderating in the near term, risks are skewed to a second wave as growth remains resilient and policy becomes more accommodative.
🟢 Emerging markets local currency bonds
We remain positive on EM local debt. The combination of resilient global growth , and a structurally weaker US dollar backdrop supports returns.
Investment grade credit
🟡US
We remain neutral on US IG. While balance sheets remain sound, spreads (the yield difference between government and corporate bonds) remain extremely tight and new issuance conditions are aggressive, leaving valuations vulnerable to any deterioration in earnings.
🟡 Europe
We prefer Europe over the US but remain neutral overall. Valuations are less stretched than in the US and fundamentals are stable, yet the broader compression in spreads limits upside from current levels.
🟡 Emerging markets USD
We remain neutral. The macro backdrop is favourable although valuations are gradually becoming richer.
High yield bonds (non-investment grade)
🟡US
We are neutral on US high yield. While headline spreads appear reasonable, much of the return has been driven by distressed segments. Outside those pockets, compensation for risk looks limited.
🟡 Europe
We retain our neutral stance. Fundamentals are supported by resilient growth and stable financial conditions; however, we prefer equity risk.
Commodities
🟢 Energy
Stronger growth and fiscal support underpin oil demand. Even without extreme fiscal expansion, deregulation and resilient activity support energy prices.
🟢 Gold
We remain positive as continued central bank demand, particularly from emerging markets, remains a key driver of prices.
🟡 Industrial metals
A firm growth backdrop and reflation dynamics are supportive, particularly if fiscal measures stimulate investment activity; however, recent volatility warrants caution.
🟡 Agriculture
Food inflation risk exists under second-wave scenarios, but demand effects appear gradual rather than explosive, keeping the stance balanced.
Currencies
🟡 US $🔼
We have moved to neutral on the US dollar. While structural diversification away from the dollar remains a longer-term theme, existing portfolio exposures already provide sensitivity to renewed dollar weakness. Near-term risks appear more balanced.
🟡 UK £
We remain neutral on sterling. The UK macro backdrop has continued to weaken and a re-emergence of political risk premium may weigh on the currency. We await further clarity following the anticipated interest rate easing cycle.
🟡 EU €🔽
We have downgraded to neutral. Although resilient growth remains supportive, we have taken profits on our explicit long position versus the US dollar given broader portfolio exposure to dollar weakness.
🟡 CNH ¥
Although inflation in China has somewhat moderated, which could provide some support to the currency, we prefer to express US dollar diversification through other exposures.
🟡 JPY ¥
We maintain a neutral stance on the yen. Policy normalisation remains gradual and near-term currency drivers appear balanced.
🟡Swiss franc ₣
We remain neutral on the Swiss franc. It continues to exhibit safe-haven characteristics in a structurally weaker dollar regime,
Source: Schroders, February 2026. The views for equities, government bonds and commodities are based on return relative to cash in local currency. The views for corporate bonds and high yield are based on credit spreads (i.e., duration-hedged). The views for currencies are relative to the US dollar, apart from the US dollar which is relative to a trade-weighted basket.
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