With sticky inflation that could trend higher as M2 accelerates, and a higher-for-longer rate regime, Elizabeth Burton favors income, real assets, and private credit, especially over increasingly stretched AI-linked exposures
NEW YORK, July 13, 2026--(BUSINESS WIRE)--Fortress Investment Group today released its 2026 Mid-Year Outlook, authored by Chief Strategist Elizabeth Burton. The report strikes a posture that is "cautious, but selectively constructive," arguing that a spring easing in geopolitical risk and energy has calmed markets – but the underlying setup remains fragile.
"From where we sit, the outlook may call for positioning that is less a bet on catastrophe than an insistence on being paid to wait – on cash flows, uncorrelated return streams, and discipline on long-duration equity," says Mrs. Burton.
With the Federal Reserve leaning hawkish and the 10-year Treasury near 4.5%, Mrs. Burton urges allocators to stay invested in quality and income while keeping selective hedges. She flags six themes for the second half of 2026, three out-of-consensus and three constructive:
Contrarian: Inflation higher, not lower: Inflation is more likely to move up than down and could run north of 4% by year-end – above both the Fed's estimates and the Bloomberg contributor composite – as the impact of M2 reaccelerating at a nearly 7% quarterly annualized pace feeds through to inflation numbers with a 12- to 18-month lag.
Contrarian: A 5-handle on the 10-year: With the curve repricing higher and term premium rebuilding, Mrs. Burton would not be surprised to see the 10-year Treasury reach 5% by year-end.
Contrarian: Private credit could outperform median buyout private equity over the medium-term. Mrs. Burton believes the reasons to prefer private credit in private markets are substantial, and support a marginal dollar asset allocation to private credit over private equity.
Fade the duration rally the consensus keeps waiting for until the inflation situation is clearer. Consider staying in fixed income through TIPS, as nominal 10-year Treasuries near 4.5% may not compensate for the inflation path we expect. TIPS can deliver yield plus inflation protection.
Constructive but selective in credit: Mrs. Burton believes bilaterally negotiated credit is the way to play these markets on a risk-adjusted basis. Consider leaning into floating-rate and asset-based finance. Floating-rate middle-market credit at high single to low double-digit all-in yield and asset-based finance, where collateral values inflate with the price level or short duration allows reinvestment at higher rates, can be both defensive and offensive exposures in this environment.
Own real assets. Mrs. Burton believes infrastructure with CPI-linked cash flows and gold are the cleanest expressions of the negative-real-rate trade. Gold's structural support through central bank purchases should continue in the long term and it remains a historically valid geopolitical hedge, although a hawkish fed reduces gold demand in the near term.