1. Scarce latitude for risk premium compression
A consistent trend over the past two years has been the erosion in fixed income risk premium. Investors that have traditionally demanded to be well-compensated for the credit risk of lending to corporate borrowers have become increasingly sanguine about the yields they are willing to accept.
Figure 1: Narrowing risk premium between 10-year U.S. Treasuries and 10-year U.S. investment grade, U.S. high-yield and emerging market corporate bonds, January 2022-November 2025. Source: ICE Data Indices
In September 2022, investors were seeking a risk premium of more than 200bps over U.S. Treasuries to buy 10-year investment-grade corporate bonds, but by September 2025 that spread had contracted to below 90bps. By one measure, the IG credit spread over Treasuries that month was the lowest it has been since the late 1990s.1
That trend holds up in 10-year high-yield corporates (spreads collapsing from 473bps in March 2023 to 197bps in October 2025) and 10-year emerging market corporates (spreads compressing from 467bps in April 2023 to 139bps in September 2025).2
Investor confidence in the creditworthiness of corporate issuers has been bolstered by four consecutive quarters of double-digit earnings growth in the S&P 500, the equanimity with which financial assets met the imposition of U.S. tariffs, and the absence (thus far) of a feared resurgence in U.S. inflation.
Can risk premium compress further? To do so, macroeconomic clouds like a cooling labor market and slowing consumer spending would have to dissipate. Other headwinds include anxiety that U.S. equity markets are overheating (specifically the AI trade) and that a significant drawdown is on the cards.
Given the highly favorable conditions needed to sustain further spread compression, it seems likely that risk premium will reassert itself next year.
2. A syndicated market for private credit
2025 was arguably the year when private credit went mainstream. While by no means a new market (it passed $500 billion in AUM in 2013)3 the explosive growth of the sector saw it vault past the $3 trillion AUM threshold this year, with expectations of surpassing $5 trillion by 2029.4
A significant portion of this growth will come from increasing retail participation in private credit arrangements through vehicles known as business development corporations, which are open to individual investors and are rapidly approaching the $500 billion AUM milestone.
Investment from the retail segment will only take private credit so far, however, and if lofty growth expectations are to be met by the end of this decade, broadening institutional participation in private lending will be key. Currently, private equity lenders overwhelmingly extend private loans unilaterally: one lender providing credit to one borrower.
The next step in the development of private credit will require the ability to syndicate private loans, enabling other prospective liquidity providers to examine the terms of the credit facility and elect to take a piece of the loan for themselves.
The ability for loan originators to securely share loan documents among a broader universe of private creditors will drive greater mutualization of risk, while freeing up originator balance sheets to extend more private loans to borrowers.
Expect to see efforts to create a syndicated loan market become one of the defining trends for private credit in 2026.
3. Sentiment data: the next frontier for alpha seekers?
For financial markets, unstructured data represents a vast trove of untapped insights into everything from consumer behavior to social media sentiment. Artificial intelligence has made the processing of this data or ‘sentiment analytics’ more efficient, allowing its application by a fast-growing range of market participants.
The integration of sentiment data into financial models holds the promise of improved risk management, a more comprehensive view of markets, and - most tantalizingly - potential to outperform. In the year ahead, expect to see increasingly sophisticated sentiment analytics emerge, while asset managers explore novel ways to enrich the data.
This dynamic will favor market participants who invest in data analysis and the ability to process information at ever greater speeds. Challenges include the ability to protect consumer data privacy and deal with an influx of AI ‘slop’ - low quality, often misleading content that makes it hard to extract trade signals from a deluge of data noise.
Here, ICE plans to offer a streaming event-based feed and summary stories based on sentiment data provided by Reddit, Dow Jones, and soon Polymarket. Our expertise in dealing with complex data allows us to scrub, filter and anonymize this information and link it to companies and brands to develop knowledge graphs.
More broadly, the rise of AI has elevated the value of proprietary data, whether it be sentiment data or the pricing of illiquid fixed income securities. As AI becomes integral to many trading strategies, models that need large volumes of data to learn will only be as robust as the quality of information that fuels them.
4. Property insurance dominates the U.S. housing cost conversation
My first commentary of 2025 focused on the devastating wildfires in Los Angeles, their impact on municipal bonds and the cost of U.S. property insurance. I noted that some of the largest property insurers now refuse to write new (or renew existing) home insurance policies in California and suggested that climate risks will drive both an increase in cost and decrease in availability of home insurance in the years ahead.
In 2026, expect to see the real estate conversation move away from the mortgage element of the housing cost equation and into the variable cost column - specifically the insurance line item.
ICE analysts recently released their findings from an in-depth study into how home insurance costs changed across the U.S. between 2014 and 2025. They found:
- Average annual insurance premiums for single-family homeowners rose ~90% from 2014 to 2025, driven by home value growth, inflation, climate risks, and other factors.
- Over 1.9 million insurance contracts have been dropped nationwide since 2018, particularly in parts of the country with high wildfire and hurricane risk.
- Louisiana has the highest statewide insurance costs in the U.S. in 2025, paying $11.75 to buy $1,000 of hazard coverage - almost double the nationwide average cost.
As pressures on property insurance intensify, expect to see the inexorable rise in home insurance costs dominate the mortgage industry discussion in 2026.
5. The structural shift to ETFs gains momentum
Exchange-traded funds had a banner year, with U.S. inflows surging past a record $1 trillion by October 2025, bringing global assets to over $19 trillion. This dynamic reflects the twin forces of resilient investor sentiment and a structural shift away from mutual funds. The relatively lower costs of ETFs continue to lure investors, alongside the transparency, liquidity and tax efficiency of these vehicles. Also supporting inflows: markets shrugged off initial concerns around U.S. tariffs to breach fresh highs - though lingering uncertainty likely drove a preference for the diversification of ETFs over stock picking.
More than just an investment wrapper, ETFs have played a key role in making complex and illiquid assets more accessible to retail investors - including alternatives, fixed income, gold, digital assets and private credit. Longer term, these vehicles could change the fundamentals of asset classes, such as the boost to liquidity already seen in several fixed income segments. For institutions, ETFs represent an efficient way to move large blocks of risk across markets and quickly adjust portfolio exposures.
In 2026, uncertainty over the U.S. economic outlook may provide further tailwind for ETFs, along with a proliferation of new strategies and access to asset classes like cryptocurrencies. Expect growing appetite for customization, active strategies, and the ongoing sophistication of these vehicles. Whether ETF inflows continue to break records is an open question, but the durability of their appeal remains.
1 https://www.wsj.com/finance/bonds-are-heading-for-the-best-year-since-2020-02c5738b
2 EM companies rush to global debt markets as risk premium falls to near 20-year low
3 https://www.bny.com/corporate/global/en/insights/rise-of-private-credit.html
4 https://www.morganstanley.com/ideas/private-credit-outlook-considerations