Allview: Market Risk Monitor

Key takeaways

• As we enter 2026, several of our top 10 risks have shifted. We see that geopolitics may continue to play a major role in how risks evolve and influence market outcomes over time.
• We’ve downgraded the risk of an inflation spike from #1 down to #4. Each month that passes with a relatively stable U.S. tariff regime reduces the likelihood of unexpected price increases, as both importers and consumers have more time to adjust their behavior.
• Conversely, the risk of China taking more aggressive action toward Taiwan has moved up the list, from #9 to #2. The U.S. action in Venezuela, along with the concept that major powers have a right to a sphere of influence in their world region, could embolden China. For context, we believe the probability of meaningful action remains modest—roughly 10–15% over the next 12 months.
• New to the list at #10 is a risk that the U.S. midterm elections could move policy to the left. We believe a potential “blue wave” in 2026 could lead to modest policy changes that benefit health care companies and disadvantage defense and oil-related energy companies. Our best estimate places the probability of Democratic control of the House above 70%, with a roughly 30% chance of Democrats controlling both chambers.
• Our top risk for the marketplace remains the elevated valuations of U.S. mega-cap stocks relative to the broader U.S. market, driven largely by enthusiasm around artificial intelligence (AI) infrastructure build-outs. As AI innovations spread to sectors across the economy, a rotation out of the mega-cap names could follow. In our view, portfolios overweight mega-cap growth equities may underperform broad equity indexes, while portfolios overweight mid- and small-cap equities could outperform.