Markets Near Historic Highs Demand Disciplined Investing | Partners Group Outlook

What's New

Partners Group's Private Markets Outlook 2026 introduces the "Investing at High Altitude" framework, acknowledging that markets are entering 2026 near historic peaks while outlining strategies for navigating elevated valuations, policy-driven growth, and transformative secular trends including AI disruption and infrastructure modernization cycles.

Why It Matters

With private equity transaction volumes rebounding sharply from multi-year lows and policy support from US fiscal measures, European monetary easing, and China's domestic initiatives expected to underpin growth, investors face a critical inflection point where disciplined valuation approaches and scenario planning will separate winners from losers across a USD 174 billion asset management platform.

Big Picture Drivers

• Policy convergence: US rate cuts (75bps delivered in 2025, another 25-50bps expected), ECB easing toward 1.5% terminal rate, and China's consumption-focused stimulus create coordinated global support

• AI transformation: Generative AI's total addressable market projected to nearly double by 2027, approaching USD 1 trillion, with broad-based productivity gains expected after 2030

• Infrastructure imperative: USD 106 trillion in global infrastructure investment needed through 2040 as aging systems operate beyond design life and AI-driven data center demand surges

• Transaction recovery: US and European private equity buyout activity poised to exceed prior peak levels from 2021-2022 as deal flow accelerates

• Regional bifurcation: US offers higher growth with inflation risk while Europe presents lower entry valuations and wider credit spreads

By The Numbers

• USD 11 trillion in floating-rate debt positioned to generate substantial interest savings from rate cuts

• 5%+ lift in after-tax incomes anticipated from US tax changes under the One Big Beautiful Bill Act

• USD 10 trillion in lost GDP by 2039 if US fails to upgrade critical infrastructure

• USD 2 trillion estimated royalty market size as the asset class gains traction as a portfolio diversifier

• 40-50% target allocation each for North America and Europe, with 10-20% for rest of world

Key Trends to Watch

• Credit bifurcation: Direct lending to large companies faces margin compression while selective middle-market lending in Europe offers wider spreads, lower leverage, and stronger creditor protections.

• Secondaries momentum: LP-led inflection portfolios command attractive discounts across private equity, infrastructure, and real estate as direct transaction activity remains muted.

• Power infrastructure: US energy assets present compelling opportunities as data centers and transportation drive electricity consumption growth of 1.5% annually through 2050.

• Royalty expansion: New sectors including sports and technology are emerging beyond traditional pharmaceutical, energy, and entertainment royalties, offering non-dilutive capital alternatives.

The Wrap

Partners Group's 2026 outlook emphasizes that while elevated market levels create volatility risk, disciplined investors who stress-test for disruption, build portfolios patiently over 3-4 year vintages, and maintain regional diversification can capture value from both near-term transaction recovery and long-term secular themes spanning AI, infrastructure modernization, and demographic shifts.