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Multi-Asset Solutions Team latest asset allocation views

April 2026

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Asset allocation views: resilient portfolios in uncertain markets

AI and global conflict are driving markets. Diversification remains key.

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Key global themes

Three forces shaping markets today: How to navigate macro uncertainty, the AI build‑out, and a smarter take on diversification.

  • Middle East conflict: energy risk and macro uncertainty
    • The only thing that’s clear about the conflict in the Middle East is that pinning down a neat timeline or clean forecast is impossible.
    • We’re currently assessing the conflict through three lenses: Time, infrastructure damage, and escalation. So far, the time portion has extended beyond what we would’ve assessed, and we’re starting to see the conflict’s impacts filter through to macro data like inflation. The full extent of infrastructure damage remains to be seen, but at the time of writing, it doesn’t appear to be irreversible, which is what’s allowing markets to continue treating the disruptions in the conflict as temporary.  
    • We look at the conflict’s impact on growth and inflation more in terms of rank order than point estimate. To that end, North America is relatively well- sheltered, with Europe being slightly more affected. Emerging markets are being impacted more quickly and with greater intensity.
    • Central banks have positioned themselves accordingly, with North American institutions willing to wait for evidence of secondary effects on inflation; Europe is slightly more wary; the UK and emerging markets have taken the most hawkish turn. 
  • AI: bubble or build-out?
    • AI isn’t acting like a classic bubble. The focus has shifted from hype to large‑scale investment in chips, data centers, and power systems, funded mainly by strong cash flow. Spending is still ahead of monetization and near‑term productivity, but the build‑out continues.
    • Market leadership has become more selective. Strength is concentrated in enablers such as semiconductors, memory, power equipment, grid upgrades, and cooling. Some software companies are lagging as monetization takes longer, deal cycles slow, and platform competition increases.
    • We remain positive but valuation aware. We focus on AI areas with clear earnings momentum and watch revenue scaling and power availability. With valuations elevated, earnings misses could trigger pullbacks, so we prefer disciplined position sizing and a balanced mix of quality growth, selective cyclicals, and value across equity markets.
  • Diversification isn’t dead; it’s different
    • The traditional idea that bonds reliably hedge equities can weaken when inflation or geopolitics dominate. Recent tensions in the Middle East have pushed energy prices higher and kept bond yields from easing, even as equities softened. This underscores the importance of portfolios that draw on multiple sources of return instead of relying on a single hedge.
    • Equity opportunities are broadening globally. In the United States, elevated valuations support a wider mix across styles and market caps to help reduce concentration risk. Elsewhere, Japan, Europe, and parts of emerging markets offer selective opportunities. Conflict in the Middle East  have contributed to a pullback in non‑U.S. equities and temporary U.S. dollar strength, which may offer a chance to rebuild non‑U.S. exposure as conditions stabilize.
    • We also see value in diversifiers beyond traditional stocks and bonds. Allocations to precious metals, liquid alternatives, and diversified real‑asset exposures can help support portfolio resilience when correlations between equities and bonds weaken, and traditional hedges become less reliable.

Source: Manulife Investment Management, March 31, 2026. These views are updated on a quarterly basis. This commentary is provided for informational purposes only and is not an endorsement of any security, mutual fund, sector, or index. Diversification does not guarantee a profit or eliminate the risk of a loss. No forecasts are guaranteed. 

Asset class overview

  • We remain modestly overweight equities, supported by robust earnings trends, steady global growth, and productivity‑driven investment themes such as AI. While valuations, inflation pressures, and broader geopolitical uncertainty present ongoing risks, the current macro backdrop still leans supportive of risk assets.
  • We continue to be underweight fixed income given upside inflation risks and rising fiscal pressures that leave long‑end yields vulnerable. We favor shorter duration, and note that tight credit spreads, particularly in investment grade, limit upside despite healthy corporate balance sheets.
As of December 31, 2025, from a broad asset-class overview perspective, Manulife Investment Management’s Multi-Asset Solutions Team remains modestly overweight equities and underweight fixed income. Source: Multi-Asset Solutions Team, Manulife Investment Management, as of March 31, 2026.

Broad equity

  • We’ve downgraded U.S. equities to neutral, as elevated starting valuations limit upside despite resilient earnings and AI‑related investment and modest policy tailwinds. With risks skewed by sticky inflation and the potential for earnings or macro disappointments to trigger a tech-led pullback, we favor a barbell approach that balances quality growth with cyclical value.
  • We’ve upgraded Canada equities to overweight, supported by favorable commodity tailwinds and the rotation toward value and cyclical sectors such as materials and industrials that dominate the Canadian market. We acknowledge the risks from tariffs and trade uncertainty, which could lead to near-term fluctuations.
  • We’ve upgraded emerging markets to overweight, driven by improving growth, increasing AI-related investment flows, and attractive valuations relative to developed markets. Despite trade-related risks, stronger commodity prices provide an additional boost for key EM exporters.
As of December 31, 2025, Manulife Investment Management’s Multi-Asset Solutions Team remains overweight in U.S. equities and neutral on Canada and emerging markets. The team has moved to neutral on developed international markets ex-North America. Source: Multi-Asset Solutions Team, Manulife Investment Management, as of March 31, 2026. NA refers to North America.

Regional/sector-specific equity

  • We’ve upgraded Japan equities to overweight, with the near-term outlook supported by improving cyclical momentum, a favorable fiscal backdrop, and solid earnings. Structural reforms and continued governance improvements further reinforce our long-term constructive view.
  • We remain neutral on Europe ex‑UK, with improving macro signals and supportive valuations offset by softer earnings trends and elevated geopolitical and energy‑price risks. We prefer value over growth, with selective opportunities in markets such as Spain and Sweden.
  • We remain overweight Asia-Pacific ex-Japan equities, focusing on select opportunities in markets benefiting from resilient regional growth and AI-linked supply-chain demand, e.g., Taiwan, South Korea.
  • We’ve moved infrastructure equities to overweight, supported by reasonable valuations, solid income, and their natural inflation‑resilience. Structural demand from the AI data‑center build-out and continued investment in renewable energy and utility‑grid upgrades provide a strong long-term tailwind.
  • We remain overweight commodities, with a preference for base metals such as aluminum, supported by strong demand and ongoing supply constraints. Gold remains constructive as a long-term portfolio diversifier, while we stay cautious on oil given ongoing geopolitical risks.
Taking a regional and sector-specific view, as of March 31, 2026. Manulife Investment Management’s Multi-Asset Solutions Team is neutral on U.S. small and mid-cap, U.K., Europe ex-U.K., Japanese, Emerging Latin America, Mainland China, Hong Kong and Infrastructure equities. The team is underweight Real Estate Investment Trusts and overweight Asia-Pacific ex-Japan equities and commodities. Source: Multi-Asset Solutions Team, Manulife Investment Management, as of March 31, 2026. 1. Public markets only.

Fixed income

  • We’ve moved underweight U.S. investment grade overall. From a duration perspective, we continue to favor short and intermediate opportunities in the United States, as longer-term assets haven’t provided portfolio defense amidst recent geopolitical turmoil, driven by oil-driven inflation concerns. Additionally, we expect longer-term structural headwinds to pressure long-end yields higher.
  • We remain neutral on U.S. high yield driven by a positive macroeconomic backdrop. However, we expect limited upside from further spread tightening.
  • Within Asia, we continue to prefer high-yield over investment-grade credits, as the higher all‑in yields offer a more attractive cushion against market uncertainties. They also tend to be driven by company‑specific fundamentals, making them less sensitive to broad macro headwinds.
  • We remain overweight EM debt, though our preference is for local currency-denominated debt driven by an expectation of continued U.S. dollar weakening. 
  • We maintain a neutral view on convertible bonds as stable credit fundamentals and above-average implied equity volatility are offset by ongoing geopolitical risks and inflationary pressures. The asset class’s concentration in higher-growth sectors, such as technology, represents both a risk and a potential driver of upside.
With respect to fixed income securities, the Manulife Investment Management Multi-Asset Solutions team is overweighting emerging market debt and Asian high-yield debt as of March 31, 2026. Source: Multi-Asset Solutions Team, Manulife Investment Management, as of March 31, 2026. 2. No previous outlook for this sub-asset class.

Private markets

  • We remain optimistic about global infrastructure as strong secular trends, including digitization and decarbonization, require significant amounts of long-term capital investment and showcase resilience through market cycles.
  • Private credit remains a compelling asset class.  While there are elevated risks in select subsectors, fundamentals are largely stable.  Softened demand from recent headlines has led spreads to tick  higher for new loans, favoring lenders.  All-in yields remain in the high single digit, low double-digit range.
  • We’re underweight private equity due to elevated valuations, extended holding periods, tighter exit conditions, and diminished benefits from leverage. The industry’s scale and slower turnover challenge its ability to sustain historical return assumptions.
Within private markets, Manulife Investment Management’s Multi-Asset Solutions Team has an overweight stance to global infrastructure and private credit as of December 31, 2025. The team is neutral on U.S. real estate, Canadian real estate, European real estate, timberland, and farmland, and has an underweight stance to private equity. Source: Multi-Asset Solutions Team, Manulife Investment Management, as of March 31, 2026.
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Asset class focus

Broadening diversification amid an evolving market environment

As stock-bond correlations rise, a wider toolkit can help investors navigate a shifting macro landscape

Equity and bond correlations have trended higher as inflation persists, long-term yields remain elevated, and structural forces such as deglobalization, geopolitical tensions, fiscal expansion, and tariff policies exert pressure. This shift reduces the reliability of traditional diversification and heightens the need for broader sources of portfolio resilience.

Commodities can offer meaningful diversification, supported by structural strengths in both precious and base metals. Gold benefits from central bank and investors’ diversification demand, along with supportive currency and policy dynamics. Copper and aluminum should see long-term support from constrained supply, rising strategic importance, and demand tied to electrification, data centers, and industrial substitution.  Oil, while structurally challenged, presents a tactical opportunity so long as disruptions in the Strait of Hormuz continue to restrict global flows.

Alternatively, a more diversified mix of real assets, spanning real‑asset‑linked equities, inflation‑linked bonds, and commodities, can help investors weather structurally higher inflation, supply disruptions, and geopolitical fragmentation. Chronic underinvestment and rising long‑term demand from AI, electrification, and the energy transition further reinforce the case for these assets, which can also provide low correlations and durable income.

Liquid alternatives, including long‑short equity, market-neutral, managed futures, and absolute return strategies, can complement equities and bonds by relying less on market direction and more on alpha, trend, and volatility dynamics. These strategies can help manage interest‑rate and equity‑market risk, improve drawdown resilience, and provide a smoother path of returns during periods of heightened uncertainty.

U.S. stock-bond correlation

The chart shows the rolling correlation between U.S. stocks and U.S. Treasury bonds from 1990 to 2026 using 3‑month and 1‑year measures, with correlations shifting from strongly positive in the mid‑1990s to predominantly negative and back to positive territory in 2026. Source: Bloomberg, Macrobond, Manulife Investment Management, as of March 19, 2026. Shaded areas denote U.S recessions. Stocks are represented by the S&P500 Total Return Index. Bonds are represented by the Bloomberg U.S. Treasury Total Return Index.
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Asset class returns

Asset class returns comprise the Multi-Asset Solutions Team’s expectations of how different asset classes may perform over a 5-year and long-term (20-year-plus) time horizon.

Expected returns

Source: Multi-Asset Solutions Team, Manulife Investment Management, as of April 30, 2026. Not all asset classes with forecasts are represented in every portfolio managed by the Multi-Asset Solutions Team. Data shown in the tables reflects the most recent data available. Asset class forecasts comprise inputs driven by proprietary Manulife Investment Management research and are not meant as predictions for any particular index, mutual fund, or investment vehicle. To initiate the investment process, the investment team formulates 5-year and 20-year-plus risk/return expectations, developed through a variety of quantitative modeling techniques and complemented with qualitative and fundamental insight. Assumptions are then adjusted for a number of factors. REITs refer to real estate investment trusts. USD, CAD, and CNY refer to the U.S. dollar, the Canadian dollar, and the Chinese yuan, respectively. This chart contains forecasts reflecting potential future events and is only as current as of the date indicated. There is no assurance that such events will occur, and the actual asset class return may be significantly different from that shown here. This material should not be viewed as a recommendation or a solicitation of an offer to buy or sell any investment products or to adopt any investment strategy. It is not possible to invest directly in an index. Past performance does not guarantee future results. No forecasts are guaranteed.

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Multi-Asset Solutions Team

  • Nathan W. Thooft, CFA

    Nathan W. Thooft, CFA

    CIO, Multi-Asset Solutions Team, Global Equities

    Find out more about Nate and his views
  • Robert E. Sykes, CFA

    Robert E. Sykes, CFA

    Senior Portfolio Manager, Head of Asset Allocation, U.S., Multi-Asset Solutions Team

    Find out more about Robert and his views
  • James Robertson, CIM

    James Robertson, CIM

    Senior Portfolio Manager, Head of Multi-Asset Solutions, Canada, Head of Tactical Asset Allocation, Multi-Asset Solutions Team

    Find out more about James and his views
  • Luke Browne

    Luke Browne

    Senior Portfolio Manager, Global Head, Multi-Asset Solutions Team, Head of Multi-Asset Solutions, Asia

    Find out more about Luke and his views
  • Geoffrey Kelley, CFA

    Geoffrey Kelley, CFA

    Senior Portfolio Manager, Global Head, Systematic Equity Solutions, Multi-Asset Solutions Team

    Find out more about Geoff and his views
  • Benjamin W. Forssell, CFA

    Benjamin W. Forssell, CFA

    Client Portfolio Manager, Global Multi-Asset, Multi-Asset Solutions Team

    Find out more about Ben and his views
  • Eric Menzer, CFA, CAIA, AIF

    Eric Menzer, CFA, CAIA, AIF

    Head of Advisory Solutions, Senior Portfolio Manager, Multi-Asset Solutions Team

    Find out more about Eric and his views

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