Six investment ideas for a more diversified market

By Juliet Schooling Latter on 8 January 2026 in Equities, Fixed income

At the start of 2025, an all-consuming focus on a handful of US technology companies had left plenty of opportunities across global markets. Market leadership diversified in 2025 and, at the start of this year, valuations have ticked up, and investors need to dig deeper for potential growth. Here are six of our favourites for the year ahead.

Artemis UK Select

Last year was a great year for the FTSE 100, which has outpaced its global peers. However, UK small and mid-caps have continued to struggle with poor investor sentiment, in spite of a rising tide of buybacks, M&A activity and stronger earnings.

UK smaller companies have been unloved for some time and compelling valuations haven’t brought investors back to the sector. While we continue to see plenty of value there, and believe that they could move quickly and significantly when sentiment turns, it is difficult to predict an inflection point.

A compromise option would be a high-conviction, multi-cap, UK equity fund such as Artemis UK Select. Manager Ed Leggett is optimistic about UK equities in the year ahead: “We’ve got a tailwind from falling inflation, a tailwind coming from interest rates coming down. We’re sticking with the view we’ve had over the past couple of years that there is potential for consumers to spend more.”

The fund has seen strong performance from financials and industrials, such as Rolls Royce in recent years. Today, it is also favouring housebuilders and consumer cyclicals, particularly retail and hospitality companies. Ed believes buybacks are likely to be important, moving from larger companies down to smaller companies. “One of the drivers is that UK equities are cheap in a global context and companies see an opportunity to retire undervalued equity over time.”

FTF ClearBridge Global Infrastructure Income

Infrastructure has had a decent year in 2025, though its gains have been eclipsed by the strength of more glamorous areas such as technology. In 2026, the sector’s inflation-adjusted income and steady returns may have more appeal, particularly if interest rates fall. Nick Langley, manager of FTF ClearBridge Global Infrastructure Income says that the sector is also benefiting from structural tailwinds, such as decarbonisation, investment in ageing network infrastructure to improve resiliency, and AI and data centre growth, which is driving power demand.

Invesco Global Emerging Markets fund

Emerging markets had a great year in 2025, with the average fund in the IA Global Emerging Markets sector up 22%*. But, with the exception of India, this success has come after many years of lacklustre returns. Over five years, the MSCI Emerging Markets index has delivered an annualised return of just 4.2%, compared with 11.2% for the MSCI World index**. As a result, valuations do not look demanding and there may be further to run.

Ian Hargreaves, manager of the Invesco Global Emerging Markets fund, says: “We believe emerging market equities currently offer double-digit earnings growth, with reasonable valuation levels across much of the universe. The asset class continues to trade at a significant discount to global equities, particularly the US market.”

He recognises that there are some geopolitical risks associated with emerging markets and uncertainty from the US government’s protectionist approach. However, he adds:

Nomura Global Dynamic Bond

Interest rates in the US and UK are expected to fall in 2025, which should bring down government bond yields (and push up prices). However, some cuts are already in the price, and spreads for corporate and high yield bonds over government bonds are tight. This argues for some caution on fixed income in the year ahead. While there are reasons that spreads could go lower, there doesn’t appear to be a lot of value there.

We suggest a ‘go anywhere’ fund, such as Nomura Global Dynamic Bond. Manager Dickie Hodges is cautious on credit spreads and looking for idiosyncratic opportunities across global bond markets. He says: “While we continue to expect risk assets to perform well, we have to be cognisant that credit spreads have tightened considerably and there are multiple sources of potential volatility in the present political, geopolitical and economic environment.

The fund also has substantial risk hedging in place in the form of CDS index-based protection (which helps guard against immediate volatility in spreads) and equity index put options. Dickie says: “The latter are deeply out of the money and will protect the Fund if we see significant falls in risk assets arising from an (as yet) unknown source of volatility.”

Polar Capital Global Healthcare and Global Insurance

The final two options are in specialist equity. The healthcare sector is starting to recover after a tough year, dominated by uncertainty over drug pricing. Following deals between the major drugs companies and the US government, there is now greater clarity, allowing investors to focus on the long-term tailwinds for the sector. The MSCI World Healthcare index rose 10.7% in the past three months of 2025**.

Gareth Powell, manager of the Polar Capital Global Healthcare Trust, says:

These factors can now come to the fore.

The insurance sector merits a place in a portfolio for its defensive qualities. In 2022, the MSCI World Insurance index rose 14%, one of the very few sectors to deliver a positive return*. If there is weakness in global stock markets over the next 12 months, or a wobble in the AI trade, funds such as the Polar Capital Global Insurance fund may help provide protection.

Opportunities and risks are finely balanced in the year ahead, and valuations in some parts of the market leave room for error. Diversification is likely to be every bit as important as it was in 2025 and active managers with flexible mandates should be in their element.

*Source: FE Analytics, total returns in pounds sterling, discrete calendar year performance

**Source: index factsheet, 31 December 2025

***Source: fund update, Q3 2025