Markets enter 2026 in a period of transition rather than disruption. Inflation pressures are easing, growth is slowing but holding up, and monetary policy is moving away from peak restriction. At the same time, elevated valuations, market concentration, and rising capital intensity mean that returns are likely to be more selective and harder earned than in the immediate post-pandemic rebound. This outlook sets out how we see the year ahead, shaped by evolving macro conditions, market structure, and the forces likely to drive portfolio outcomes in 2026.

1. 2025 Market Review: Broad Returns and a Higher Bar for US Assets

Risk-on sentiment defined markets in 2025, culminating in an “everything rally” that saw all major asset classes deliver positive returns for the first time since the pandemic. Despite significant crosscurrents, most notably heightened trade tensions in the first half as US tariffs reached levels last seen in the 1930s, markets ended the year on new highs. Developed...