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1. US Q1 positive growth surprise? The One Big Beautiful Bill Act passed last year put in place several lower tax rates, resulting in lower 2025 tax bills for many US households and larger Q1 2026 tax refunds (USD 1000+ average per household). This should boost US domestic consumption and GDP growth over Q1 2026
2. Long-term bond yields to rise further? Over 2025, the Japanese 10-year JGB bond yield almost doubled from 1.1% to 2%, while German 10-year bund yields rose from 2.4% to 2.9%. Lower inflation but high debt refinancing requirements pull yields in different directions. Expect little movement in 10-year bond yields.
3. Stock leadership rotates to Value from Tech: in 2025, global value outperformed growth by a record 18% in USD after 8 consecutive years of growth dominating. Favour value-oriented sectors such as Financials, Industrials and Building & Construction. Strong momentum in UK, Spanish, Swiss and Swedish stocks.
4. Strategic industrial metals in a bull market phase: copper, tin and aluminium continue to gain ground, propelled by strong technology and electricity generation-related demand and limited supply. Continue to favour these physical base metals and copper miners.
5. Silver, platinum and palladium have rallied dramatically in December as shortage of supply and strong industrial demand have squeezed physical markets. We return to a positive view on gold and upgrade our 12-month gold price target to USD 5000/ounce. Our silver price target is also increased to USD 80/ounce.
After three consecutive years of exceptional equity market performance, investors enter 2026 facing a legitimate inflection point. The question is no longer whether markets can deliver positive returns, but how those returns will be generated in a more mature phase of the cycle. Valuations are higher and macroeconomic signals are becoming more nuanced.
In this environment, navigating the financial markets requires more than directional conviction. For professional investors and wealth management practitioners, 2026 calls for refined investment strategies, combining selective risk exposure, income generation and thematic allocation. The year ahead is likely to reward discipline, diversification and an informed reading of evolving financial news rather than broad-based beta exposure.
1. Macro and Market Views
Q1 2026 could deliver positive economic surprises
The US economy is poised to start 2026 on a relatively strong footing. Generous tax refunds following lower effective tax rates in 2025 are expected to provide a temporary but meaningful boost to household consumption in the first quarter. Average refunds of USD 1,000–2,000 per household should support discretionary spending, particularly in housing-related segments.
Lower mortgage rates reinforce this momentum. The decline in 30-year fixed mortgage rates has already begun to stimulate housing transactions and associated consumption. At the same time, AI-related capital expenditure remains robust, as mega-cap technology firms continue to invest aggressively in data centres and computing infrastructure.
However, this front-loaded growth profile should not be extrapolated mechanically. Beyond Q1, softer labour market dynamics are likely to weigh on consumption, leading to a clearer slowdown in activity during the remainder of the year. This asymmetry reinforces the importance of tactical flexibility within investment strategies rather than reliance on a single macro scenario.
Europe: a gradually improving growth profile
Europe enters 2026 with improving, albeit still modest, growth prospects. Falling energy prices continue to ease inflationary pressures, restoring household purchasing power and improving corporate margins. At the same time, lower ECB policy rates are gradually translating into improved credit demand from both businesses and households.
Rising house prices and equity markets are generating a positive wealth effect, particularly in core economies such as Germany. With household savings rates still elevated, even a modest normalisation could unlock additional consumption. Finally, government spending on infrastructure and defence, led by Germany’s expansionary fiscal stance, should begin to support activity more visibly.
For diversified wealth management portfolios, Europe offers a more balanced risk-return profile than in recent years, especially where valuations remain more attractive than in the US.
Green light for stocks in January
Global equities closed 2025 near multi-year or all-time highs across most developed markets. While the prospect of a fourth consecutive year of strong gains naturally raises caution, the fundamental conditions for equity exposure remain broadly supportive. Recession risks appear limited in the near term, as monetary policy remains accommodative and earnings growth is expected to remain solid.
Importantly, leadership within the financial markets is rotating. Performance is shifting away from US mega-cap technology towards value-oriented sectors such as Financials, Industrials and Health Care. Regionally, markets such as Japan, South Korea, Sweden and Canada have demonstrated renewed momentum.
This broadening of market participation is a healthy development in the later stages of a bull market. It supports continued equity exposure, provided allocations are increasingly selective and aligned with earnings visibility rather than valuation expansion. a
Emerging market equities, particularly in Asia, remain a strategic overweight. Lower rates, a softer US dollar and improving sentiment towards China create a constructive backdrop for selective EM exposure within global investment strategies.
2. Stay Bullish On Metals
Strategic Industrial metals
Industrial metals remain a key conviction for 2026. Copper, aluminium and tin benefit from a powerful combination of structural demand, driven by electrification, energy transition and AI-related investment, and constrained supply. Copper stands out in particular, with limited capacity expansion and accelerating demand justifying higher price expectations.
These dynamics position industrial metals not merely as cyclical trades, but as core components of alternative investments allocations, offering diversification and exposure to long-term structural trends.
Precious metals: strong but volatile
Precious metals delivered extraordinary returns in 2025, with silver and platinum experiencing extreme price movements due to physical market tightness. While such volatility warrants tactical caution in the short term, the medium-term outlook remains constructive.
Gold has reasserted its strategic relevance as a hedge against geopolitical uncertainty, monetary easing and currency debasement. Within diversified portfolios, precious metals continue to play a valuable role as alternative investments, complementing traditional asset classes.
3. Bonds are boring once again
Bond markets offer limited excitement but renewed stability. With inflation easing globally and central banks either cutting rates or maintaining accommodative stances, long-term sovereign yields are expected to remain range-bound. As a result, bond returns in 2026 are likely to broadly reflect current yield levels.
Investment-grade corporate credit spreads remain near historic lows, supported by strong balance sheets and a low default environment. As cash deposit rates decline, demand for high-quality credit should remain firm. While returns are modest, bonds continue to serve as an essential stabilising component within wealth management portfolios.
4. 2026 Top convictions
Several high-level convictions shape our outlook for 2026:
- A preference for value-oriented equity sectors over growth-heavy positioning
- Continued focus on non-US equities, particularly Japan and emerging Asia
- Strategic exposure to industrial and precious metals
- Selective use of alternative investments to enhance diversification
- An expectation of structurally softer US dollar dynamics
Together, these convictions reflect a late-cycle but still constructive environment across the financial markets.
5. Our main Investment Themes for 2026
1. Ride the bull market, but anchor profits
Equity markets remain supported, but volatility management becomes increasingly important. Diversification beyond US mega-caps and selective use of structured solutions allow investors to remain exposed while protecting accumulated gains.
2. The end of "cash-returns" - refocus on incom
As cash becomes less rewarding, income-oriented assets regain prominence. Credit, dividend-paying equities and selected emerging market bonds become central pillars of sustainable investment strategies.
3. Beyond algorithms: the next phase of AI
Opportunities increasingly lie in the infrastructure enabling AI (energy systems, automation and robotics) as well as in traditional sectors adopting AI to boost productivity.
4. Investing in a world of scarcity
Structural shortages in energy and strategic metals reinforce the case for real assets. These trends strengthen the role of commodities and infrastructure within alternative investments frameworks.
5. Politics and investment policy: a new paradigm
Public spending, regulation and industrial policy now shape returns as much as economic fundamentals. Infrastructure, defence and selected real assets benefit from this shift in the financial markets.
6. Asia as a structural growth engine
Asia combines innovation, domestic investor participation and attractive valuations. It remains a cornerstone of long-term global investment strategies.
The outlook for 2026 remains constructive but more demanding. Returns are likely to be driven less by valuation expansion and more by earnings growth, income generation and thematic exposure.
For investors and wealth management professionals, success will depend on disciplined asset allocation, thoughtful integration of alternative investments, and close attention to evolving financial news shaping global markets.
Edmund Shing, PhD
Global Chief Investment Officer
