Northern Trust forecasts AI-driven strength in private markets in 2026

Northern Trust Asset Management forecasts improving and stable fixed income returns; market-leading the United States, Japanese and Australian equities; resilient real assets; and strong private market prospects driven by innovation over the next decade, according to its Capital Market Assumptions (CMA) 2026 Edition.

The CMA also identified three key long-term trends to markets and the global economy — rising innovation and declining demographics, the global shift to self-reliance, and looming debt and deficits — that provide the foundation for returns of stocks, bonds, real assets and alternatives.

“AI continues to demonstrate potential to transform productivity and labour markets, helping to offset the challenges of an aging workforce. Private markets should also benefit from this trend, as AI will likely drive private equity deals and private credit fuels the buildout of AI infrastructure,” said Northern Trust Asset Management global co-chief investment officer Anwiti Bahuguna. “Understanding how AI-related gains intersect with rising debt and fiscal pressures will be essential to building resilient portfolios and capturing long-term opportunities.”

“Global markets over the next 10 years will be defined by rapid innovation, shifting demographics and evolving trade dynamics,” said Northern Trust Asset Management global co-chief investment officer Christian Roth, CFA. “We believe prioritising risk-aware growth in portfolios can capture the upside of increased innovation, while mitigating downside risks from demographic and fiscal pressures.”

Northern Trust Asset Management forecasts the following average annualised return expectations across asset classes over the next 10 years:

Equities: US (6.8%), Japan (7.3%) and Australia (7.7%) are projected to lead global returns. US companies are likely to gain from technology-driven productivity, Japanese equities from economic and market catalysts, and Australian stocks from banking strength and natural resources.

Fixed Income: Long-term investors can expect better fixed-income performance, with 5.0% for US investment grade bonds and 4.6% for treasuries. Investors in European, UK and Japanese bonds can expect decent income with low volatility.

Real assets: AI will drive demand for real assets, with expectations for attractive returns in global infrastructure (6.7%), natural resources (6.4%) and global real estate (6.2%).

Alternatives: Private markets are expected to outperform public markets, with a projected 10.2% annualised return for private equity and venture capital combined. Private credit is expected to return 8.2% annualised.

Driving the CMA’s forecasts are three long-term trends affecting markets and the global economy:

Rising innovation, declining demographics: AI, automation and robotics are transforming labour markets, offsetting aging populations but causing job displacement. Retraining workers and monitoring productivity measures will be vital, as increasing AI adoption will creating both risks and opportunities across sectors.

The global shift to self-reliance: Geopolitical tensions and protectionism are pushing countries toward self-reliance. This shift may slow growth and boost inflation, but also foster local innovation and new alliances. High US tariffs are leading to renewed interest in regional trade agreements and efforts to reduce internal barriers.

Debt and deficits loom large: Rising debt and government budget deficits, intensified by aging populations and increased public spending, threaten global growth. While AI may aid the US, some nations could struggle as high debt dampens innovation and limits policy options.

Rooted in deep capital market analysis, the CMA is an annual report of long-term average annualised return expectations that informs Northern Trust’s investment decisions and strategic asset allocation recommendations.

Re-disseminated by Wealth and Society