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We kick off calendar 2026 by trying our hand at our own sentiment indicators - combining valuation and implied volatility for the US equity and bond markets, the Aus equity market and ASX small caps. Are investors paying a premium price for market calmness? Then we check in on Morningstar's bottom-up valuations. There is a chasm between small and large cap valuations based on revenue multiples but not so much on earnings. Tech has done the heavy lifting in large cap valuation AND earnings in the US over the past decade and the trend is expected to continue - but can US smalls deliver on lofty targets and drive a catch-up? In US dollars, the US market has underperformed most major markets in the Americas. Then we look at how short-term (daily) volatility itself is becoming more volatile over time. Turning to the economy, we look at personal loan delinquencies and savings rates, with signs of deterioration in consumer behaviour.

A custom US equity market sentiment score - based on CAPE adjusted equity risk premium and the VIX relative to their historical average and volatility

Source: Equitable Investors

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A custom ASX equity market sentiment score - based on the dividend yield spread on bonds and the ASX VIX relative to their historical average and volatility

Source: Equitable Investors

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A custom ASX small cap sentiment score - based on the dividend yield spread on bonds and realised volatilty relative to their historical average and volatility

 

Source: Equitable Investors

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A custom US debt market sentiment score - based on 10 year bond yield and MOVE Index of implied volatility relative to their historical average and volatility

Source: Equitable Investors

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Market price relative to US market bottom-up valuations from Morningstar

Source: Morningstar

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Market price relative to ASX market bottom-up valuations from Morningstar

Source: Morningstar

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Earnings: US Tech vs the Rest

Source: Topdown Charts

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Actual reported and bottom-up consensus EPS growth estimates

Source: Goldman Sachs Global Investment Research

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Enterprise Value / consensus sales - S&P 500 (IVV ETF) v US microcaps (IWM ETF)

Source: Koyfin

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Enterprise Value / consenus EBITDA - S&P 500 (IVV ETF) v US microcaps (IWM ETF)

Source: Koyfin

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Price / consenus EPS - S&P 500 (IVV ETF) v US microcaps (IWM ETF)

Source: Koyfin

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Country ETF performance over past 12 months (in USD)

Source: Koyfin

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No. of daily 10% swings per calendar year in the VIX (CBOE Market Volatility)

Source: Iress, Equitable Investors

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No. of daily 10% swings per calendar year in the S&P/ASX VIX

Source: Iress, Equitable Investors

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Personal Loans - 90+ Delinquency (#)

Source: Equifax

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Australian savings ratio

Source: RBA

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USA personal saving

Source: St Louis Fed

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Private markets should enter 2026 with a renewed sense of purpose. After a period of volatility and recalibration, the landscape has shifted in favour of long-term investors seeking resilience, diversification, and access to secular growth themes. 

From the growing role of private credit in corporate finance to the acceleration of digital and green infrastructure, the past year has underscored the strategic importance of private assets in modern portfolios.

The macroeconomic backdrop is evolving. Global growth has slowed but remains intact, and inflationary pressures are beginning to ease. Central banks are approaching the end of their tightening cycles, with some already pivoting towards more accommodative stances. This shift in monetary policy is improving financing conditions, and supporting deal activity and valuations across private markets.

Against this backdrop, our latest Private Markets House View outlines a cautiously optimistic outlook across the four major asset classes: private equity, private credit, infrastructure, and real estate. Each offers distinct opportunities, shaped by structural trends and regional dynamics.

Private equity: rebound and realignment

Private equity has staged a strong recovery, with deal-making regaining momentum as confidence returns to the market. Improved credit availability and greater alignment between buyers and sellers have helped restore activity levels. Valuations, which had softened during the previous downturn, have rebounded, reflecting both stronger financing conditions and a focus on higher-quality assets.

Thematic investing remains central to private equity strategies. Technology and healthcare continue to attract capital, driven by innovation and demographic shifts. Businesses that harness digital tools, automation, and artificial intelligence are particularly appealing. Meanwhile, sectors more exposed to economic cycles are being approached with greater caution, as investors prioritise resilience and long-term growth potential.

Looking ahead, private equity is expected to maintain its role as a key driver of portfolio returns. While macroeconomic risks persist, the combination of structural tailwinds and a disciplined investment approach positions the asset class well for the coming years. 

Private credit: filling the lending gap

Private credit has cemented its place as a vital source of capital, particularly as traditional banks scale back lending. In some regions, deal activity has been more subdued, reflecting recent market volatility and policy uncertainty. However, the underlying demand for private credit remains robust, with investors drawn to its income-generating potential.

In Europe, direct lending has been especially active. It is supported by structural trends, such as bank disintermediation and the continued appetite for flexible financing solutions. Lenders are focusing on smaller, mid-market transactions where pricing and terms remain attractive.

Credit quality has held up well, with lenders adopting more conservative structures to mitigate downside risk. As interest rates stabilise, the appeal of floating-rate instruments and the potential for enhanced yields continue to attract capital. Private credit opportunities are emerging in both traditional lending and more opportunistic strategies.  

Infrastructure: investing in the future

Infrastructure investment is thriving, fuelled by the global push towards digitalisation and decarbonisation. Capital deployment has accelerated, with strong interest in sectors such as renewable energy and digital infrastructure. These areas are benefiting from long-term policy support and growing demand for sustainable and connected solutions.

Investors are increasingly looking beyond traditional core assets, seeking exposure to opportunities that offer a blend of stability and growth. Core-plus strategies, which involve assets with modest development or operational risk, are gaining traction as they offer the potential for higher returns without sacrificing predictability.

The pipeline for infrastructure projects remains healthy, supported by public and private sector initiatives. As the energy transition gathers pace and digital connectivity becomes ever-more critical, infrastructure is set to remain a cornerstone of private market allocations.  

Real estate: a market in transition

Private real estate is showing signs of stabilisation following a period of adjustment. The easing of monetary policy is beginning to support valuations, and certain regions are experiencing a modest recovery. However, performance remains uneven, with outcomes varying significantly by geography and sector.

A clear polarisation is emerging within the asset class. Investors are gravitating towards high-quality, future-fit assets that align with long-term trends. Logistics and residential properties are in favour, driven by structural demand and limited supply. In contrast, traditional office and retail assets face ongoing challenges, with changing work patterns and consumer behaviour reshaping demand.

The focus is increasingly on assets that offer sustainability credentials, adaptability, and strong tenant demand. Value-add strategies, which involve repositioning or upgrading properties, are also gaining interest as investors seek to unlock value in a shifting landscape.

Final thoughts...

As we look to the year ahead, private markets offer a compelling proposition. Each asset class presents unique opportunities, underpinned by structural change and evolving investor needs. While selectivity and discipline remain essential, with improving macro conditions, private markets will continue to be a key driver of portfolio diversification and resilience.

Private markets have become a vital component of investors' asset allocation. By embracing innovation, sustainability, and long-term thinking, investors can position themselves to navigate uncertainty and capture the opportunities that lie ahead in 2026 and beyond.