Adapting to Uncertainty: L&G Stays Pro-Risk but More Selective

Legal & General’s Q2 2026 outlook argues investors should adapt to a world of persistent geopolitical and inflation shocks, favouring equities while becoming more cautious on credit and duration. 

• L&G upgraded equities to overweight, viewing the conflict-driven selloff as an entry point supported by resilient earnings and broader AI beneficiaries.
• Duration moved back to neutral, as supply shocks may weaken the traditional negative correlation between stocks and bonds.
• The firm is cautious on credit, citing thin spreads, rising downgrade/default risks, and asymmetric downside.
• It sees selective value in Japan bonds, Brazil/Romania local debt, infrastructure trusts, and the yen as a hedge.

Markets still want certainty. L&G’s message is different: portfolios now need flexibility more than conviction.