YEAR AHEAD 2027 | 12-MONTH GLOBAL OUTLOOK

GROWTH WITHOUT GOLDILOCKS

November 2026 | PGIM’s view of the macro backdrop, market implications, and investment themes shaping the year ahead.

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MACRO VIEW

WHAT WILL SHAPE 2027?*

Inflation Volatility

 

Energy shocks, trade frictions, and supply constraints are keeping inflation elevated and increasingly volatile.

A New Flavor of Globalization

 

U.S. hyperscaler capex raises import demand for requisite AI-buildout inputs, supporting growth in supplier economies.

Unchecked Fiscal Pressures

 

High deficits, rising debt costs, and political gridlock continue to strain government finances.

 

Central Banks on Alert

 

Persistent inflation and strong investment demand are keeping major central banks biased toward further tightening.

MARKET VIEW

EXPLORE BY MARKET

Understand what the 2027 outlook could mean for public and private markets.

THEMES

FOUR THEMES FOR 2027

  1. "Normal" interest rates bode well for fixed income over the long term; prioritize selective carry over long duration
  2. Higher interest rates need not derail risk assets
  3. Next phase in the Al buildout: supply-demand bottlenecks
  4. Supply constraints as a source of alpha

 

Click through for considerations by market.

A stacked bar chart showing the contribution of income return, income growth, and yield impact to global real estate returns, as a percent of total, by decade from the 1980s through 2020s and for the historical average. Income return and income growth account for most of the return contribution across the periods shown, although their relative contributions vary by decade. For the historical average, income return contributes approximately 60% of total returns, with income growth and yield impact accounting for the remainder.
Source: PGIM. As of October 2026. Private investments are generally illiquid, may use leverage, involve credit and valuation risk, typically carry higher fees than public investments, and may not be available or suitable for all investors or in all jurisdictions. Investing involves risk, including loss of principal.

PUBLIC FIXED INCOME

A Normal Cycle

Rates are back to historically “normal” levels, improving fixed income’s long-term return prospects, even though yields may not yet have peaked.


Market Considerations

  • Yields will likely be a key source of total returns. However, we remain cautious on long duration.
  • We see potential income opportunities in short-maturity developed and emerging market high yield and high-quality securitized products, such as AAA CLOs.
Historical line chart comparing the cash interest rate with the 10-year U.S. Treasury yield from the late 1800s through the mid-2020s. Both rates have varied substantially over time, with the 10-year Treasury generally ranging between approximately 2% and 8% for much of the period, but peaking close to 16% around 1980. Cash rates fell to near zero following the dot-com aftermath, the global financial crisis (GFC), and the COVID-19 response. By the end of the period, both rates are near 4% to 5%, within the range observed across much of the historical record.
Source: PGIM and Bloomberg. As of September 30, 2026. Past performance is not a guarantee of future results. Fixed income investments are subject to interest rate and credit risk. When rates rise, bond prices generally fall. High yield, emerging market and securitized investments, including CLOs, involve greater risk, including default and liquidity risk.

PUBLIC EQUITIES

The AI Buildout’s Demand and Durability

The AI cycle remains fundamentally supported as strong demand for compute collides with constraints across semiconductors, power generation, and grid infrastructure.


Market Considerations

  • AI-investment commitments appear relatively insensitive to interest rates.
  • Semiconductor exposure remains central, but the opportunity is broadening into Asian supply chains, memory, cloud services, power equipment, and grid technology.
  • AI monetization is expanding beyond initial use cases, requiring investors to distinguish operating fundamentals from shifts in sentiment and positioning.
A stacked bar chart showing forecast incremental AI data center power demand, in gigawatts, increasing from 13 gigawatts in 2025 to estimates of 21 gigawatts in 2026, 35 gigawatts in 2027, 45 gigawatts in 2028, 55 gigawatts in 2029, and 59 gigawatts in 2030. Each bar distinguishes identified AI data center shipments from GE Vernova, Siemens Energy, and Mitsubishi Heavy Industries (combined) from additional potential Bloom Energy capacity which appears to take up roughly half of the estimated power demand in most periods.
Source: Jennison and company reports. As of October 2026. Figures after 2025 are estimates, may not be achieved and are subject to change. References to specific companies are for illustration only and are not recommendations. Equity investments may lose value. Concentration in a theme or sector, such as AI-related companies, may increase risk. Forecasts may not be achieved, are subject to change, and are not a guarantee or reliable indicator of future results.

PRIVATE CREDIT

A Relative Value View on Private Credit

Private credit enters 2027 from a position of strength, with structural trends expanding the opportunity set beyond the traditional credit cycle.


Market Considerations

  • Illiquidity and complexity premia remain wider than historical averages in several private-credit submarkets.
  • We see favorable relative value in asset-based finance, investment-grade and below-investment-grade commercial real estate credit, infrastructure debt, and private placements.
  • Increasing dispersion and tail risks require disciplined underwriting, careful structuring, and strong manager selection.
A stacked bar chart showing the size and composition of the private credit market in U.S. dollars. The market grows from $0.6 trillion in 2010 to an estimated $2.9 trillion in 2025 and $4.6 trillion in 2030. Private credit includes direct lending, corporate private placements, infrastructure debt, private commercial real estate debt, and private asset-based and specialty finance. Direct lending represents the largest individual segment in the 2030 estimate.
Source: Preqin, PitchBook, Macquarie, MetLife/HIMCO, ACC/AIMA, Deloitte, and PGIM. As of April 15, 2026. 2025E and 2030E figures are estimates and may not be achieved. References to relative value, premia, and opportunities reflect PGIM's views and do not assure investment results. Private investments are generally illiquid, may use leverage, involve credit and valuation risk, typically carry higher fees than public investments, and may not be available or suitable for all investors or in all jurisdictions. Investing involves risk, including loss of principal. Forecasts may not be achieved, are subject to change, and are not a guarantee or reliable indicator of future results.

PRIVATE REAL ESTATE

Real Estate's Early-Cycle Extension

Higher rates are extending the early phase of the real estate cycle, but resilient fundamentals continue to support property income growth.


Market Considerations

  • The next six to 12 months may provide attractive entry points for credit, equity, and refinancing strategies.
  • Core and high yield real estate credit may benefit from higher interest rates, while strong growth continues to support property income growth.
  • Favor income-driven credit, data centers, defensive retail, and long-horizon value-creation strategies.
A stacked bar chart showing the contribution of income return, income growth, and yield impact to global real estate returns, as a percent of total, by decade from the 1980s through 2020s and for the historical average. Income return and income growth account for most of the return contribution across the periods shown, although their relative contributions vary by decade. For the historical average, income return contributes approximately 60% of total returns, with income growth and yield impact accounting for the remainder.
Sources: CoStar, Cushman & Wakefield, JLL, PMA, and PGIM. As of November 2026. Yield impact shown as zero contribution to overall returns in periods where it was negative on average. Past performance is not a guarantee of future results. Real estate investments involve risks including fluctuations in property values and rental income, interest rate changes, and illiquidity. Private investments are generally illiquid, may use leverage, involve credit and valuation risk, typically carry higher fees than public investments, and may not be available or suitable for all investors or in all jurisdictions. Investing involves risk, including loss of principal.

WEBINAR | FIRST ACCESS

POSITIONING FOR GROWTH WITHOUT GOLDILOCKS

THURSDAY, DECEMBER 17 | 9 AM EST

When growth comes without Goldilocks, navigating markets demands a different playbook. Join PGIM experts as they unpack the trends, risks, and opportunities shaping the year ahead.

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OFFERINGS

FEATURED OFFERINGS

The Morningstar Rating for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustments for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year(if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

©2026 Morningstar, Inc. All rights reserved. The information contained herein (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

Past performance is not a guarantee or a reliable indicator of future results.

CAPITAL MARKET ASSUMPTIONS

Our 10-year assumptions guide our long-term outlook and strategic allocations across select strategies and multi-asset portfolios.

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PGIM 10-Year Capital Market Assumptions report cover shown within a blue circle.

FAQ

INVESTORS ARE ASKING

Any forward-looking statements, including projections or forecasts, are subject to change without notice and are not guarantees of future results.

* Forecasts, estimates, and views, including those on interest rates, inflation, central bank policy, market size, and sector outlooks, reflect PGIM's opinions as of the dates shown, are based on assumptions, may not be achieved, and are not guarantees or reliable indicators of future results.

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