After the global "stock-debt business" achieved its strongest bull market since 2009, Wall Street is starting off 2026 with high expectations.

At the beginning of the new year, the market continued the momentum from the end of last year: the market was up, Wall Street confidence remained high, and there was hardly any sign that the factors driving the market up in 2025 had faded. However, how long this cross-asset synchronous trend can continue is currently unclear. On the first trading day of January, global stock markets rose, continuing the upward trend that had been going on for most of last year. The AI boom, slowing inflation, and supportive policies from central banks around the world overshadowed unfavorable factors such as trade disputes, geopolitical tensions, and overvaluation. For investors, this once again confirmed a simple truth: taking risks will eventually bring returns. However, what is unusual this year is not only the strong upward trend, but also the broad range of assets it covers. Stocks and bonds rose in sync, credit spreads narrowed again, and commodity prices continued to rise despite easing inflation pressure. The widespread and sustained rise is exceptionally coordinated. By the end of the year, the financial environment had reached its most accommodative level since 2025, highlighting the rise in valuations and investors' consistent expectations for economic growth. Looking at global stocks, bonds, credit, and commodities, the cross-asset performance in 2025 is the strongest since 2009where the characteristics in 2009 were crisis-level valuations and extensive government policy interventions. This strategy makes diversified investing seem effortless, but it also masks the importance of whether the factors driving returns over the past 12 months can remain unchanged. When assets that were originally intended to offset each other move in the same direction, the protective nature of the portfolio is diminished. While returns may accumulate, the margin for error will shrink. Jean Boivin, head of global research at BlackRock Investment Institute, said, "We believe that diversification may be falsely prosperous in 2025. This is not a story where diversifying across these asset classes will provide protection." As the market enters 2026, people are not worried about whether last year's uptrend was irrational, but whether this momentum will be difficult to recreate. Wall Street's expectations still rely on the same driving factorsmassive investments in AI, robust economic growth, and policymakers being able to loosen monetary policy without triggering inflation. Forecasts from over 60 institutions show a consensus that these factors are still present. This optimism stems from the market having already absorbed a lot of good news. Carl Kaufman, portfolio manager at Osterweis, said about stocks related to AI and nuclear energy, "We believe that the rapid expansion of valuations in certain industries is neither sustainable nor replicable. We cautiously optimistic that a major crash can be avoided, but we are concerned that future returns may be lackluster." The strong uptrend in the stock market last year helped explain why the US stock market saw returns of about 18%, achieving double-digit growth for the third consecutive year, while global stock markets rose by about 23%. Government bonds also saw increases, with global bond prices rising by nearly 7%, thanks to three rate cuts by the Fed. Market volatility has significantly decreased, and credit markets have followed suit. The measure of volatility in the US bond market recorded its largest annual decline since the financial crisis, and investment-grade bond spreads have narrowed for the third consecutive year, with the average risk premium falling below 80 basis points. Commodities have also joined the uptrend. An index tracking this sector rose by about 11%, with precious metals leading the way. Supported by central bank purchases, loose US monetary policy, and a weakening dollar, the price of gold has repeatedly hit new highs. Inflation remains a sticking point. While price pressures eased for most of 2025, some investors warn that energy market shifts or policy mistakes could quickly reverse this progress. Ina Krishnan of Schroders Global Investments said, "For us, the key risk is whether inflation will eventually resurge. We foresee that a series of events could trigger inflation, with the most likely path starting with a rise in energy prices." This tension is not only reflected in the market. The Bloomberg Billionaires Index shows that the total wealth of the world's richest 500 people increased by a record $2.2 trillion last year, while at the same time, US consumer confidence declined for the fifth consecutive month in December. Last year, traditional Wall Street diversified investment strategies also saw a revival. A 60/40 stock and bond portfolio saw a return of 14%, while an index tracking so-called risk-parity quant strategies rose by 19%, achieving its best annual performance since 2020. Balanced strategies have yet to attract investor interest, as they have not performed well compared to funds that have experienced prolonged outflows. Overall, asset allocators remain optimistic, believing that strong economic growth and policy support are strong enough to offset concerns about elevated valuations. Josh Kutin, head of North American asset allocation at Columbia Threadneedle Investments, said, "We are planning to use as much cash as possible to take full advantage of the current market environment. We currently do not see any signs to worry about an imminent economic downturn."