NEW YORK, Jan 11, 2026, 04:17 EST
- BlackRock strategists believe the AI trade will extend into 2026, though they advise investors to look beyond just the mega-cap leaders.
- As central banks slash rates, BlackRock expects cash yields to fall, driving up demand for income-generating portfolios.
- The firm points out that long-dated U.S. Treasuries are becoming a less dependable hedge amid shifting debt and rate volatility in the markets.
BlackRock sees the AI-driven bull market stretching into 2026 but advises moving away from broad “AI-only” plays toward more targeted investments and reliable income streams, according to recent media comments. Kristy Akullian, head of iShares investment strategy for the Americas at BlackRock, told Yahoo Finance on Jan. 9 that AI is “no longer the only game in town.”
The message comes as investors begin the year holding significant cash reserves, just as policy rates decline. In a Jan. 7 outlook, BlackRock pointed out that money-market yields are already dropping and flagged this as a crucial time for retirees to seek more “durable sources of income,” noting there’s roughly $9.1 trillion in money market funds globally. “For retirees, the ultimate measure of success is the confidence in income and how the portfolio pays, rather than how the market performs,” wrote Justin Christofel, a BlackRock income-investing executive.
In their Jan. 5 “Investment Directions” guide, Akullian and co-author Gargi Pal Chaudhuri projected 2026 to deliver “above-trend growth, easing policy, and accelerating productivity.” They cautioned, however, that pricey valuations and an unclear rate outlook call for careful stock picking. The report also predicted over $700 billion in AI infrastructure spending next year and noted the S&P 500 “AI stocks” group they follow posted net income growth around 30% annually between 2023 and 2025, compared to about 3% for their non-AI counterparts.
BlackRock is urging investors to stay invested in AI but to diversify around it. The firm singled out the “belly” of the yield curve—bonds with intermediate maturities—as a source of both income and stability. Emerging market bonds also made the list, benefiting from looser global financial conditions. The firm recommended broadening exposure through international stocks, dividend-focused strategies, and alternatives. Income streams, they said, can come not just from bonds and dividends but also from options plays like covered calls, which trade potential stock gains for premium income.
The firm’s Investment Institute, which shapes its broad market outlook, has sounded a louder macro warning tied to the same theme. It flagged that the AI buildout is increasingly fueled by debt — with investment upfront and revenues lagging — making the system more vulnerable to jumps in bond yields. The institute said it is now “tactically underweight” long-term U.S. Treasuries, as investors push for higher term premiums, the extra yield required to tie up money for longer periods. (BlackRock)
BlackRock linked that view to the current fiscal environment. In a Dec. 2 report, Wei Li, the firm’s global chief investment strategist, noted that “Higher borrowing across public and private sectors is likely to keep upward pressure on interest rates,” pointing to U.S. government debt topping $38 trillion.
The institute contends this is reshaping the concept of “diversification.” It points out that a few dominant forces now steer markets, so spreading bets across well-known public assets may carry more active risk than investors realize. It also notes that long-term Treasuries no longer offer the same protection against equity volatility as before.
BlackRock isn’t the only one flagging that stock-picking and careful portfolio construction could outshine straightforward rotation trades in the next phase. PineBridge Investments dismissed comparisons to the late-1990s tech bubble, highlighting that today’s AI surge is more grounded in profits. They also advised investors to consider “diversifying their diversifiers” as term premia climb and long bonds lose their edge as hedges. (PineBridge Investments)
Still, the downside is clear. In a previous iShares report, Akullian noted that valuations haven’t reached dot-com bubble levels but warned that heavy concentration leaves portfolios vulnerable if a handful of leaders falter — and stressed that “concentration may not always equal a bubble,” even though it increases risk. Should AI spending outstrip the pace of profitable rollouts, or if yields surge due to fiscal or inflation shocks, both stocks and bonds could take simultaneous hits. (BlackRock)
