Q1 2026 Asset Class Outlook: Global equity

February 02, 2026

Broadening earnings and policy tailwinds set the stage for global equity opportunities.

As part of our Asset Class Outlook series, our sub-advisor MFS Investment Management shares its views and perspectives for the global equity space for the first quarter of 2026.1

Global equity markets entered 2026 with a constructive backdrop, supported by resilient macroeconomic fundamentals and broadening earnings growth.

United States

In the U.S., many factors should support economic growth, including:

  • Monetary easing
  • Robust fiscal stimulus, including the One Big Beautiful Bill Act
  • Deregulation
  • Accelerating AI-driven capital expenditure

Corporate profit margins are projected to reach record highs in 2026, with S&P 500 Index earnings anticipated to grow by approximately 14%2. Notably, profit expansion is broadening beyond technology, reflecting a healthy and diversified corporate landscape.

While valuations remain elevated, they are supported by strong earnings momentum, and fiscal stimulus is set to further support the profit cycle. Risks to watch include:

  • Slower-than-expected realization of AI revenues
  • Persistent inflation
  • Potential U.S.-dollar strength may lead to tightening financial conditions

Europe

Europe is poised for a recovery. Two factors support it:

  • The lagged effects of European Central Bank rate cuts and fiscal support driving credit expansion
  • Improving sentiment across housing and construction

Germany’s fiscal package and anticipated earnings recovery, alongside ongoing capital markets reform, offer pockets of opportunity. The region’s banking sector stands to benefit from improved loan growth and potential regulatory changes.

From a growth perspective, valuations in Europe remain compelling relative to other developed markets. Stoxx Europe 600 Index earnings are forecast to grow by 12.5%3 in 2026.

Asia

Japan is expected to benefit from major fiscal stimulus and corporate governance reforms, resulting in increased capital returns and improved equity performance. The impact of still-low interest rates is bolstering consumer demand and supporting earnings growth.

Meanwhile, Asia’s AI supply chain leaders, such as Taiwan and South Korea, are expected to deliver robust results. China’s export share continues to shift toward emerging economies amid evolving supply chains and strategic resource demand.

Conclusion

Across regions, earnings growth is now the key driver of equity market performance. As we move toward AI adoption, margin expansion will likely be most pronounced among low-margin, high-productivity AI leaders.

While risks remain, the outlook for 2026 is optimistic, with favourable fiscal and monetary conditions supporting both developed and emerging markets. Investors should remain attentive to evolving risks but may find opportunities in regions and sectors positioned for structural growth.

Learn more about our Sun Life MFS funds.


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1 Data and views as of December 31, 2025 unless otherwise noted

2 Bloomberg, as of January 13, 2026

3 Bloomberg, as of January 13, 2026

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Information contained in this document is provided for information purposes only and is not intended to provide specific financial, tax, insurance, investment, legal or accounting advice and should not be relied upon in that regard and does not constitute a specific offer to buy and/or sell securities. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any mutual funds or ETFs managed by SLGI Asset Management Inc. sub-advised by MFS Investment Management. These views are subject to change and are not to be considered as investment advice nor should they be considered a recommendation to buy or sell.

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Views expressed are those of MFS Investment Management Canada Limited, sub-advisor to select Sun Life mutual funds for which SLGI Asset Management Inc. acts as portfolio manager.

MFS Investment Management Canada Limited is the sub-advisor to the Sun Life MFS Funds; SLGI Asset Management Inc. is the registered portfolio manager. MFS Investment Management Canada Limited has appointed MFS Institutional Advisors, Inc. to provide additional sub-advisory services.