The global opportunities for 2026

By James Yardley on 2 December 2025 in Equities, Global

The MSCI World index has delivered double-digit gains in 2025, capping a three-year bull run for global stock markets. A fourth year of strong gains would be unprecedented in recent history. Yet there is little obvious reason for markets to derail: the threat of recession has receded, interest rates are falling, and there is greater certainty on tariffs.

The most pressing and well-flagged risk is the sense that the AI trade that has supported so much of stock market growth over the past few years may be getting long in the tooth. There are signs of over-capacity emerging, with cross-company deals and companies tapping debt markets to support their investments.

Patrick Brenner, chief investment officer on the multi-asset team at Schroders (which manages the Schroder Global Multi-Asset Cautious Portfolio), is taking a wait and see approach: “Although risks are present, particularly around the possibility of an “AI bust” scenario, we believe it is too early to take a defensive stance. We are monitoring closely the increasing use of debt and circular financing to fund AI-related investment, as these trends could create longer-term structural vulnerabilities.”

He believes the direction of interest rates may be more important for markets, saying, “an extended period of Federal Reserve easing, assuming no recession, should remain supportive for equities.” With the odds firmly in favour of further cuts, the team is maintaining its positive view on equities, with a preference for the US, where corporate earnings are likely to be supported by significant fiscal stimulus in 2026.

There are those who are less optimistic on the US. Simon Skinner, manager of the London-based Global Investment Team at Orbis (which manages the Orbis Global Balanced fund) says:

“On top of extreme concentration risk comes valuation risk. The ten largest stocks in the S&P 500 now trade at a lofty 34x earnings. While they may be fantastic businesses, investors are paying the highest prices for the most crowded part of the market. That is a dangerous combination — and leaves little room for error if the fundamentals fail to keep pace with expectations.”

Certainly, there are plenty of other areas where valuations are cheaper and the prospects as good, if not better, than the crowded US market. Part of the problem has the assumption that AI has a monopoly on growth, and a handful of companies have a monopoly on AI. Neither is true. First, the opportunities from AI do not just accrue to a handful of mega-cap technology companies. Among its holdings, Orbis has Interactive Brokers, QXO and Corpay*. “In many of these cases, we can see long-term opportunities for AI applications to materially improve these businesses, for the time being, these are not contemplated by other investors who are seeking obvious AI plays.”

Then there are areas such as Asia, which have equal claim to the spoils of AI, but remain less widely appreciated by investors. Edmund Harris, manager on the Guinness Asian Equity Income fund, says, “Asia is an innovation powerhouse, developing proprietary knowledge and dominating new industries.” He points out that China is now leading the world in areas such as battery technology, 5G, renewable energy equipment, semiconductors and industrial automation.

The arrival of DeepSeek brought a different perspective on China. For the preceding three years, Chinese markets had been an investment backwater, with sliding returns and many investors deeming it too geopolitically fragile to be investable. It revived in 2025. It has also emerged bruised but not bleeding from its tariff showdown with Donald Trump. Its position on rare earths showed, as Trump is fond of saying, that it had some cards. Patrick Brenner continues to back China, saying valuations and sentiment remain relatively attractive.

Read more: Why China still offers compelling opportunities

Then there are other markets that remain overlooked. Here, the UK is a stand-out, particularly its mid and small-cap sector. The persistence of the discount looks more extraordinary with every passing year. If they were cheap at the start of 2025, they are even cheaper now after a year of strong earnings for many companies.

Simon Murphy, manager of the VT Tyndall Unconstrained UK Income fund, says the budget unquestionably creates weakness, but adds, “our view remains that the situation is not as dire as many of the more dramatic headlines would suggest, as evidenced by economic and corporate datapoints that remain relatively robust. However, we do firmly believe the widespread negativity is creating outstanding valuation opportunities in these areas of the market from a medium-term perspective.”

He is looking forward to 2026 with optimism: “We consider it essential to focus on the medium-term potential of our investments and our enthusiasm for our current portfolio is substantial.” This is echoed by Georgina Brittain, manager on the JPMorgan UK Small Cap Growth & Income portfolio. She says:

“Valuations remain compelling, with UK stocks trading at a discount to global peers. Recent mergers and acquisitions activity and share buybacks suggest that these discounts may be overdone, and there is growing interest from both domestic and international investors.”

Read more: Is now a good time for UK equities?

Japan has also had a strong year in 2025, with the average active fund up 18% for the year to date**. Japanese companies have continued to deliver on the promise of corporate governance reform, while the new Prime Minister Sanae Takaichi was a protegee of Shinzo Abe, and there are hopes she will continue his market-friendly reforms.

Matthew Brett, manager of the Baillie Gifford Japan Trust, points out that investors could sell Nvidia and buy, “not just Toyota Motor and a couple of other things, but the entire Japanese stock market for the same value. I think that gives a flavour for just how different expectations have become in Japan.”

He says that earnings have been strong and haven’t been fully reflected in stock prices. “There’s opportunity there within Japan because you have things going well, you have individual companies growing, and at the same time, you don’t have very high expectations.” There could be more to run in Japanese equities too.

Ultimately, investors may be focusing on whether to AI or not to AI, but there is plenty of growth elsewhere – and often at better prices. Simon Skinner urges investors to look beyond the US:

“At a time when macroeconomic and geopolitical risks feel as unpredictable as ever, diversification matters – but not the cosmetic kind offered by a benchmark dominated by stocks that are all largely reliant on a single technology bet.”

A broader portfolio is likely to protect investors against a potentially tougher year in 2026.

*Source: Orbis, What if the real American exceptionalism now lies beyond America’s biggest stocks?

**Source: FE fundinfo, 2 December 2025