Inference from interference: Looking past shocks to pursue long-term value

Othman Kabbaj, Co-Head of Global FICC Sales, Bank of America

John Aylward, Founder & CIO, SONA

Andrew Balls, CIO Global Fixed Income, PIMCO

The leaders from the worlds of finance, business and policy who gathered at Bank of America’s flagship international event are no strangers to risk, or high-stakes situations. Nonetheless, few could have anticipated the complexity or intensity of the events that served as the backdrop to the 2026 Global Investor Summit: a widening, conflict in the Middle East causing markets to whipsaw on a near-daily basis. New commodity supply bottlenecks. Signs of resurgent inflation and flagging economic growth that could exacerbate emerging pockets of distress.

As Michael Hartnett, BofA Global Research, Chief Investment Strategist, told delegates, these forces are “big things. And that’s going to lead to big changes in terms of what’s going on in the markets.”

The wide-ranging discussions covered everything from unlocking European growth, to the future of artificial intelligence (AI), as well as prospects for Latin America. Much of the dialogue naturally focused on risks: less the day-to-day unfolding of an unpredictable conflict, than its long-term effects on economies and asset classes that are already showing signs of strain.

The main issue, as Hartnett pointed out, is that years of fiscal profligacy have left many governments and central banks with little capacity to provide further support in the event of a prolonged energy crisis.

Policymakers are also contending with persistent above-target inflation, which participants on a panel of C-suite executives from leading investment managers, noted could keep policy tighter than markets expect.

Several investors warned that private credit markets had become excessively concentrated in software, an area that has been characterised by high leverage, loose underwriting and potential AI disruption. Stagflationary forces and accelerating redemptions could provoke a crisis that one panellist cast as “existential” for some players — but not necessarily the market as a whole.

Through the day’s discussions this was another recurring theme: that even in the most adverse conditions, investors should learn to zero in on positive trends that may not be immediately apparent. In private credit, for example, investors that have been careful to control leverage and sector exposure, and maintain pricing discipline, will be well-positioned to deploy in new loans with favourable risk-reward ratios as others “run for the exits.”

Emerging markets, especially India and China, were highlighted as relatively undervalued, given their recent bearish patterns, weak currencies and future growth trajectories. This aligned with Harnett’s positive view on international equities. These are set to benefit as more countries follow the US’s lead of tightening borders and ramping up spending at home to soothe rising populist sentiment, which Hartnett cast as part of a shift from the “populist capitalism” to “populist socialism.” 

Infrastructure was singled out as another area where fundamentals are increasingly attractive, particularly in areas governments perceive as strategically important, such as technology and renewable energy.

As Jim DeMare, Co-President, Bank of America, remarked in a discussion with one of the world’s largest dedicated infrastructure investors: “The compelling thing about digital infrastructure is that assets retain a core value, regardless of the winners and losers of the AI era.” The pressing need to upgrade or fix security, energy and transportation assets seen as essential to national interests will fuel more value-add opportunities, especially for investors who go beyond essentially “buying an asset and forgetting about it,” as DeMare’s counterpart on the panel put it, to actively optimising what they own.

Current events may challenge all attempts to reach definitive conclusions. But there was broad agreement among the investors and business leaders in attendance that some things will retain value regardless of how conditions shift — notably, events like the Summit, which by convening a diverse group of decision-makers from around the world provided a much-needed chance to stress-test preconceptions and gain exposure to new ideas.

As Rash Reid, Co-Head of Global FICC Sales, Bank of America, put it, “investors are trying to distinguish between signal and noise,” in a time rife with misinformation and communication breakdowns. In these conditions, frank, transparent and high-calibre dialogue can prove a source of strategic advantage.