2026 Outlook: High Grading
By: Henry McVey, KKR
This article offers trustees timely, research-based expert insights into the 2026 economic outlook and key considerations for the road ahead.
The background for the global economy remains favorable heading into 2026, but we are now later in the credit cycle and more of the productivity miracle is now being properly reflected in capital market assumptions, we believe. In our view, this backdrop argues not for derisking, but for High Grading, or upgrading portfolios, capital structures, and counterparties to emphasize resilience, quality, and capital efficiency as the cycle matures.
The good news is that the cost to High Grade one’s portfolio is extremely low today. Meanwhile (and consistent with prior years), we maintain a sharp focus on businesses and assets that can compound through what we believe is a Regime Change for investors, including higher-for-longer interest rates, ongoing geopolitical friction, and more discriminating credit markets.
Overall, this new world order that we envision argues for a tilt towards quality and scale in Public Equities, and towards Private Market opportunities where we can underwrite targeted corporate carve-outs, collateral-based cash flows, operational improvement, and emerging capital light models across Private Equity, Real Assets, and Private Credit. We believe international markets offer increasingly attractive entry points as earnings momentum turns, corporate reforms accelerate, and valuations remain well below U.S. levels.
Our bottom line for 2026: own less beta bets than in the past and favor more alpha in the form of portfolio resiliency, including the ability to make one’s own luck through structuring, governance, and active ownership.
Please click here for the complete version of KKR’s 2026 Outlook: High Grading.
About the author: Henry H. McVey is Head of the Global Macro and Asset Allocation (GMAA) team at KKR. Mr. McVey also serves as Chief Investment Officer for the firm's Balance Sheet and oversees Firmwide Market Risk and Derivatives & Liability Management. As part of his role, he also sits on KKR’s Balance Sheet Committee. Prior to joining KKR, Mr. McVey was a managing director, lead portfolio manager and head of global macro and asset allocation at Morgan Stanley Investment Management (MSIM). He is a long-time supporter of the TEAK Fellowship and sits on the organization’s Emeritus Board. He also heads GMAA Gives Back within KKR, an organization that provides pro-bono macro and asset allocation assistance to small to medium size non-profits. Mr. McVey is a board member of the Center for Strategic and International Studies in Washington, D.C. and serves on the newly formed Bank of England’s Market Participants Group (MPG).