At first glance, there seems to be little going on in equity markets. The global index is up by about a percent, Europe is doing slightly better than average, emerging markets a bit better still, and the US sits just below that. But beneath the surface the picture is turbulent. If you thought last year’s swings were already substantial (they were the largest on record), then this year is proving even more intense than 2025. The differences between sectors are wide — energy on the positive side and IT on the negative — and even within sectors the market is crackling with volatility.
"},"alignedImage":{"position":"bottom"}},{"componentType":"sectionTitle","title":"Markets are separating opportunities from risks"},{"componentType":"paragraph","richBody":{"value":"What explains these divergences? Investors are increasingly questioning how robust the AI narrative really is for each individual company. Some firms are being rewarded with valuations far ahead of reality, while others with equally solid fundamentals are taking heavy hits. This dispersion need not be negative; it actually shows markets are attempting to differentiate between opportunities and risks. The problem is that such a broad range of outcomes makes forecasting far more difficult. And when outcomes become less predictable, it is only natural that investors start to demand more compensation for taking on that uncertainty. Yet that compensation — the so‑called equity risk premium (the earnings yield minus the risk‑free rate) — now sits at its lowest level in more than twenty years.
"}},{"componentType":"sectionTitle","title":"Only a few per cent upside this year"},{"componentType":"paragraph","richBody":{"value":"Which brings me to the next point. Our return expectations for this year are lower than those of most major banks and asset managers. While they generally expect equity markets to rise sharply, driven by an anticipated profit growth of more than 10%, our expectations are more modest. From current levels, we foresee only a few per cent of additional upside. We expect the risk premium to increase, due to the uncertainty surrounding artificial intelligence and broader US policy. And that, inevitably, costs return.
"}},{"componentType":"sectionTitle","title":"US policy uncertainty is pushing risk premia higher"},{"componentType":"paragraph","richBody":{"value":"This policy uncertainty has been building for some time. We already knew that US President Trump likes to keep a firm hand on the wheel. But the way he now occasionally intervenes directly and upends business models is something new. Policy proposals on caps for credit‑card fees, dividend restrictions for defence companies, and curbing profits and premiums for health insurers all illustrate how quickly earnings prospects can shift. This does not necessarily have to play out negatively — some measures may actually ease the burden on consumers and lead to higher spending. But for investors, it mainly means that corporate risks are becoming less clear‑cut. Such uncertainty does not have to cast a shadow over markets, but it does make it evident that risk premia are more likely to rise than fall.
Fortunately, the economic outlook is not bleak and companies are, on average, performing well. That has so far kept risk premia low and share prices supported. But beneath the averages, the market is bubbling. And there will come a day when investors will want to be compensated for the risks they are undeniably taking.
"}},{"componentType":"linkList","iconTitle":{"title":"Read more"},"textLinks":[{"url":"/en/personal/investing/market-news-and-views/bobs-vision-overview-page","text":"Bob's Vision Overview"},{"url":"/en/personal/investing/market-news-and-views","text":"More News and Views"}]},{"componentType":"sectionTitle","title":"Good to know"},{"componentType":"paragraph","richBody":{"value":"Investing involves risks and costs. The value of your investment may fluctuate. Past performance is no guarantee of future results. Read more about the risks of investing.
This publication has been prepared on behalf of ING Bank N.V. and is intended for information purposes only. ING Bank N.V. obtains its information from sources deemed reliable and has taken the utmost care to ensure that the information on which it based its views in this publication was not incorrect or misleading at the time of publication. ING Bank N.V. does not guarantee that the information it uses is accurate or complete. The information contained in this publication may be changed without any form of announcement. Copyright and data file protection rights apply to this publication. Data from this publication may be reproduced provided that the source is stated. ING Bank N.V. has its registered office in Amsterdam, commercial register no. 33031431, and is regulated by the Dutch central bank De Nederlandsche Bank (DNB) and the Netherlands Authority for the Financial Markets (AFM). ING Bank N.V. is part of ING Groep N.V.
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