Nomura AM Q3 2026 Investment Outlook: Strong Fundamentals Favor Equities Over Bonds, Continued Optimism on AI-Related Sectors

Global major stock markets posted strong growth in the second quarter of this year, with AI-related U.S. indices and Asian markets in Taiwan, South Korea, and Japan delivering standout performances. Looking ahead to the third quarter, Nomura AM believes that resilient global economic fundamentals, coupled with robust AI demand, will support favorable earnings outlooks for related companies, benefiting risk assets. Meanwhile, bond markets are expected to trade in a range due to divergent investor views on the direction of U.S. interest rate policy. The firm recommends maintaining an equity-over-bonds asset allocation. For equities, the top picks are U.S., Taiwan, South Korea, and China A-shares with exposure to AI semiconductors. In fixed income, non-investment-grade bonds and convertible bonds are favored.

Chen Chih-Chou, Chief Investment Officer at Nomura AM, stated that the strong rally in global equities during Q2 was primarily driven by solid fundamentals, including healthy GDP growth and better-than-expected Q1 corporate earnings. Additionally, the preliminary agreement between the U.S. and Iran, which could restore shipping through the Strait of Hormuz, led to a drop in international oil prices below USD 80 per barrel, easing inflationary pressures and further boosting market optimism. These factors support the performance of risk assets. Recent market volatility is mainly a moderate correction following short-term gains, and the medium- to long-term outlook remains unchanged. In terms of asset allocation, the firm recommends favoring equities over bonds and reducing cash holdings in Q3.

Chen analyzed that on a fundamental level, the G20 Global Leading Economic Indicator shows strong growth momentum, suggesting that global economic activity will maintain resilient expansion. Furthermore, the global manufacturing PMI remains in expansion territory, while the global services PMI continues to stay above the 50-point threshold. If the U.S. and Iran reach further agreements, the services sector could gradually recover and regain growth momentum. On the corporate earnings front, technology stocks driven by AI-related demand and energy stocks benefiting from higher oil prices are the main drivers of earnings growth and market performance. Earnings growth expectations have been consistently upgraded across nearly all regions and sectors, highlighting the strong underlying fundamentals of equity markets. Under these conditions, even though current valuations are relatively high, elevated levels are expected to be supported by future growth potential. Investors are advised to adopt a phased buying approach during market pullbacks, focusing on markets with the highest growth potential, particularly those related to AI.

Regarding bond markets, declining oil prices have significantly reduced inflationary pressures. Although U.S. inflation data for May remained elevated, core inflation is expected to gradually decline in the second half of the year and potentially fall below 3% by Q1 2027. While the new Fed Chair, Walsh, adopted a relatively hawkish tone after his first meeting, sparking market concerns about rate hikes this year, easing inflation pressures could reduce the likelihood of further policy tightening. In the short term, with lower inflation and rapidly increasing U.S. government interest expenses, rate hikes this year are unlikely. Markets have already priced in 1–2 rate hikes by the Fed in the second half, and U.S. Treasury yields are at relatively high levels, offering a yield buffer. For the medium to long term, five key trends should be monitored: First, massive capital expenditures in AI, defense, and green energy are projected to rise from USD 8.5 trillion in 2026 to USD 15.7 trillion by 2030. Second, rising corporate financing and government spending will increase bond supply. Third and fourth, government bonds may gradually lose their risk diversification benefits, and central banks’ purchasing power for U.S. Treasuries may decline. Finally, China may shift from deflation to reflation, and the yuan could strengthen.

Lu Dan-Lan, from Nomura AM’s Overseas Investment Department, noted that AI-related topics have been widely discussed since 2023, and related stocks have performed well. While strong AI demand and growth prospects are now widely accepted by the market, the explosive gains seen this year have surprised many investors. In reality, the stock market rally driven by AI development is not exaggerated—it is unprecedented. The past 30 years of global underinvestment, stagnant economic growth, and prolonged low interest rates have reversed due to the emergence of AI, and the reversal momentum is powerful. For example, in November 2025, the market estimated that CSP companies would spend USD 600 billion in capital expenditures by 2027, but current estimates have been significantly revised upward to USD 1 trillion (Source: JP Morgan; Data date: 2026/06/17). Therefore, investors must shift their mindset and continue participating in the growth opportunities driven by AI.

The fixed income team points out that in the short term, with easing inflation and rapidly rising U.S. government interest expenses, rate hikes this year are unlikely. Markets have already priced in 1–2 rate hikes by the Fed in the second half, and U.S. Treasury yields are at relatively high levels, offering a yield buffer. For the medium to long term, five key trends should be monitored: First, massive capital expenditures in AI, defense, and green energy are projected to rise from USD 8.5 trillion in 2026 to USD 15.7 trillion by 2030. Second, rising corporate financing and government spending will increase bond supply. Third and fourth, government bonds may gradually lose their risk diversification benefits, and central banks’ purchasing power for U.S. Treasuries may decline. Finally, China may shift from deflation to reflation, and the yuan could strengthen.

[Q3 2026 Investment Recommendations]

Investment Recommendations Equities Bonds

Equities over bonds; add positions gradually on pullbacks. Focus on AI-related markets such as U.S., Taiwan, South Korea, and China A-shares. Top picks: non-investment-grade bonds and convertible bonds.

Source: Nomura AM; Data date: June 2026

Economic forecasts mentioned in this document do not necessarily represent fund performance. Please refer to the fund prospectus for investment risks.

Read more insightful articles

[Sponsored by Nomura AM]

Nomura AM

Nomura Asset Management Co., Ltd. was established in 1998 as a joint venture between Japan-based Nomura Asset Management and Hong Kong’s Allshores Group, comprising professional investment teams. Nomura AM is the exclusive distributor in Taiwan for Goldman Sachs, Ninety One, Nomura Funds (Ireland Series), and Janus Henderson Series Funds. As of December 2025, the total assets under management in Taiwan—including mutual funds, domestic discretionary mandates, and offshore fund distribution—reached NT$963.8 billion, ranking 8th among all asset management firms in Taiwan. Nomura AM has been awarded the Best Pension Fund Manager in Taiwan by Asia Asset Management magazine six times (2018–2020, 2024–2026) and Best Equity Manager five times (2020–2023, 2026). It also won the Lipper Taiwan Fund Award for Mixed-Asset Group for four consecutive years (2014–2017). (Source: Investment Trust and Advisory Association (2025/12); Lipper (2014–2017); Asia Asset Management (2026/01))

Economic forecasts mentioned in this document do not necessarily represent fund performance. Please refer to the fund prospectus for investment risks. This fund has been approved or recognized by the Financial Supervisory Commission, but this does not imply zero risk. Past performance by the company does not guarantee minimum investment returns; the company, while exercising the duty of a prudent manager, is not liable for fund profits or losses nor guarantees minimum returns. Investors should carefully read the fund prospectus before subscription. Fund transactions are based on investors’ own judgment, and investors should understand and bear any potential gains or losses, with the maximum loss possibly equaling the initial investment. Funds are not covered by deposit insurance, insurance stability funds, or other related protection mechanisms. In case of disputes arising from fund transactions, investors should first file a complaint with the company. If the company fails to respond within 30 days or the investor is dissatisfied with the outcome, they may apply for mediation at the Financial Consumers’ Arbitration Center within 60 days. Investors may also file complaints with the Investment Trust and Advisory Association, apply for mediation at the Securities Investors and Futures Traders Protection Center, or file a lawsuit in court. Information on the fund’s characteristics, related investment risks, and costs borne by investors is detailed in the fund prospectus, available from the company or fund distributors, or accessible via the Fund Information Observation Station or the company website (https://www.nomurafunds.com.tw). The fund’s beneficiary certificates are registered, issued in dematerialized form, and delivered via book-entry transfer by a central depository. Beneficiaries cannot request physical certificates. Fund distributions do not represent actual fund returns, and past distributions do not guarantee future ones; fund net asset values may fluctuate due to market factors. Fund distributions may be paid from fund earnings or a return of capital. Any portion funded by a return of capital may result in a reduction of the original investment amount.

Nomura AM is the exclusive distributor in Taiwan for Goldman Sachs, Ninety One, Nomura Funds (Ireland Series), and Janus Henderson Series Funds. [Nomura AM operates independently]

Nomura Securities Investment Trust Co., Ltd., 30F, No. 7, Xinyi 5th Road, Taipei 110615, Taiwan. Financial Advisory Hotline: 02-8758-1568