We explore the investment opportunities amid a constructive yet fragile backdrop for financial markets.
We examine six prospective investment catalysts for 2026, underscoring the significance of diversification across asset classes, regions, and sectors.
Our top catalysts for change
1. Global economic landscape: Stability amid shifting trade dynamics
After a turbulent first half of 2025 marked by significant policy uncertainty, the investment landscape remains dynamic: trade terms have shifted, and the full implications for inflation, price elasticity, and corporate margins are still unfolding. Notably, the sometimes-fraught trading relationship between China and the US continues to pose a risk of market disruption. Nevertheless, growth remains resilient, and there is reason for cautious optimism against a backdrop of supportive monetary and fiscal policies, and robust consumer spending.
2. Equity markets: Beyond the ‘magnificent seven’
The extraordinary concentration of value in a handful of US technology companies is a defining feature of today’s equity markets. Known as the ‘magnificent seven’, combined they account for 22% of the MSCI AC World global equity index.[1] While strong profitability and continuing demand can continue to support the growth of these tech giants, we believe there will be opportunities for investors to broaden their equity exposure and explore potentially undervalued opportunities with strong growth prospects, while mitigating the potential risks of extreme market concentration.
3. Capturing the breadth of AI-driven opportunities
Significant investments in artificial intelligence (AI) are buoying market sentiment and driving sectoral disruption. Market performance has so far centred on the builders and enablers of the innovation, but as adoption expands, the technology’s impact on productivity and competitive dynamics will become more visible. It will, therefore, be important for investors to look beyond the headline names to find those companies that can truly capture value from AI. Opportunities also abound among industrials, data centre operators, and infrastructure providers that support the AI ecosystem.
4. Geographic diversification with a focus on emerging markets
US equities dominate global portfolios, representing 65% of global equity market capitalisation[2] despite the US accounting for just 4% of the world’s population and about 26% of global GDP.[3] By contrast, India and China — each with approximately 17% of the global population[4] — are underrepresented in equity indices relative to their contributions to the global population and global GDP. Furthermore, emerging-market equities have been trading at a high discount to their developed-market counterparts for some time. Against a backdrop of US policy uncertainty and a weaker US dollar, we believe that selective emerging-market investments could present compelling growth prospects and provide the opportunity to diversify more meaningfully outside the US within portfolios.
5. Fixed income: Navigating policy shifts and fiscal risks
Monetary policy remains a critical driver of market dynamics. While an easing cycle is anticipated in the US, volatility is likely to persist due to uncertain inflationary trends, economic growth prospects, and fiscal challenges. Credit spreads are currently at the lower end of their historical range. In our view, this makes corporate bonds less attractive relative to government bonds. While bonds are not guaranteed as a hedge, government bonds are likely to offer better diversification benefits in the potential event of a growth slowdown. Recently we have favoured UK gilts due to appealing yields amid easing UK inflation and anticipated interest-rate cuts.
6. Building resilient portfolios: The role of real assets
We favour real assets, particularly investment trusts that specialise in renewables, infrastructure, and energy storage, as well as commodities. Despite recent headwinds from rising bond yields and regulatory changes, we maintain exposure to alternatives as a key hedge and diversifier in our multi-asset portfolios. Their inflation-linked revenues, stable income, and real underlying assets can provide resilience in ‘higher-for-longer’ inflation and potential recession scenarios. Many of these assets have recently been trading at significant discounts to their net asset value, supporting our view that carefully selected alternatives provide valuable diversification benefits versus bonds and equities.
[1] MSCI AC World Index, as of 31 October 2025, msci.com
[2] MSCI ACWI Index, as of 31 October 2025, msci.com
[3] International Monetary Fund Datamapper (imf.org), accessed 26 November 2025
[4] Worldometer (worldometers.info), using data based on United Nations Population Division estimates, accessed 26 November 2025
Important information
This is a financial promotion. This material is for professional investors only. Material in this publication is for general information only. The opinions expressed in this document are those of Newton and should not be construed as investment advice or recommendations for any purchase or sale of any specific security or commodity. Certain information contained herein is based on outside sources believed to be reliable, but its accuracy is not guaranteed.
Any reference to a specific security, country or sector should not be construed as a recommendation to buy or sell investments in those securities, countries or sectors. Please note that holdings and positioning are subject to change without notice. Where the portfolio has exposure to hedge funds, gold, private equity and property via publicly quoted transferable securities, there are additional risks associated with these sectors. Compared to more established economies, the value of investments in emerging markets may be subject to greater volatility due to differences in generally accepted accounting principles or from economic, political instability or less developed market practices.
This material is provided for general information only and should not be construed as investment advice or a recommendation. You should consult with your advisor to determine whether any particular investment strategy is appropriate. Statements are current as of the date of the material only. Any forward-looking statements speak only as of the date they are made, and are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results could differ materially from those anticipated in forward-looking statements.
Issued by Newton Investment Management Ltd. BNY Investments Newton is the name for a group of affiliated companies that provide investment management services under the trading name of 'Newton' or 'Newton Investment Management'. Investment management services are provided in the United Kingdom by Newton Investment Management Ltd (NIM), and in the United States by Newton Investment Management North America LLC (NIMNA). NIMNA was established in 2021. In the United Kingdom, NIM is authorised and regulated by the Financial Conduct Authority (‘FCA’), 12 Endeavour Square, London, E20 1JN, in the conduct of investment business. Registered in England no. 01371973. NIM and NIMNA are both registered as investment advisors with the Securities & Exchange Commission (‘SEC’) to offer investment advisory services in the United States. NIM’s investment business in the United States is described in Form ADV, Part 1 and 2, which can be obtained from the SEC.gov website or obtained upon request. All firms are indirect subsidiaries of The Bank of New York Mellon Corporation (‘BNY’).
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