LIVE MARKETS-Liquidity boost to give equities a lift in 2026

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LIQUIDITY BOOST TO GIVE EQUITIES A LIFT IN 2026

It's outlook season for both the sell-side and buy-side and it's fair to say that most strategists are somewhat optimistic for next year, even if risks around tariffs, growth slowing and sticky inflation remain.

Jefferies believes risky assets will perform well next year, given the abundance of liquidity sloshing around the financial system.

"While equity valuations look expensive on traditional measures, the rise in valuations has been in step with increasing liquidity," Jefferies economists Mohit Kumar and Modupe Adegbembo say in a note.

They expect liquidity to rise in the coming quarters, given fiscal stimulus in the U.S. and Europe, while China, Japan and India are also expected to provide stimulus.

"The rise in global liquidity should be a major tailwind for risky assets in 2026," they say.

Within the equity space, they remain overweight the U.S. versus Europe, with tech and financials their top picks. They are, however, reducing exposure to high-end chip names as they believe the AI rally should broaden.

Within Europe, Jefferies' longs are financials, defence and mining stocks. Underweights are luxury and the consumer.

(Samuel Indyk)

EARLIER ON LIVE MARKETS:

STOXX STEADY, HELPED BY FINANCIALS CLICK HERE

BEFORE THE BELL: DEFENCE AND RENEWABLES EYED IN EUROPE CLICK HERE

MARKETS RIDDLED WITH ANXIETY ON ALMOST-FED DAY CLICK HERE