As we look ahead to 2026, equity markets are projected to thrive, fueled by diverse investment opportunities and a heightened focus on strategic diversification. "We maintain a constructive outlook for equities, with a broadening of opportunities for selective investment, backed by disciplined diversification," said Nicolas Janvier, Head of North American Equities.
The economic landscape is shifting positively, influenced by adaptable policies and advancements in artificial intelligence (AI). Janvier emphasized that, "Today’s mix of policy easing, supportive fundamental backdrop, and transformative AI investments sets a constructive outlook for equity markets in 2026." Economic growth remains steady, while central banks are likely to implement further rate reductions as inflation begins to stabilize.
The disruptive potential of AI is notable, as it continues to stimulate activity across industries. "The continued build out of the artificial intelligence (AI) supply chain is driving momentum across a broadening set of beneficiaries," noted Neil Robson, Head of Global Equities, EMEA. This growth is supported not only by strong corporate earnings but also by fiscal expansions, particularly in regions like Europe and Japan.
US corporate earnings are anticipated to serve as a fundamental driver for equity returns. The outlook suggests robust growth, with Janvier stating, "Our base case is for high single-digit gains with scope for low double-digits at the upper end of our forecasts." Several positive indicators contribute to this optimism, particularly that companies have adeptly navigated the challenges posed by higher tariffs and subsequent cost changes, mitigating earnings headwinds.
"Companies appear to have adjusted well to the new environment of higher tariffs and resulting cost shifts with redesign, alternative sourcing, and selective pricing curbing earnings headwinds to an estimated 3-5% range," Janvier pointed out. Meanwhile, the AI-driven capital expenditure cycle is expected to propel revenue generation across various sectors. With interest rates trending down and inventory building, many industries that have previously faced difficulties may see a resurgence in profitability.
Diversification remains crucial in today's complex economic scenario. "We view [diversification] as a crucial consideration in 2026," Janvier remarked, outlining that while the US market continues to show strength, opportunities are emerging that extend beyond American borders.
The financial landscape since the Global Financial Crisis has typically favored US earnings, particularly driven by the tech sector. However, post-pandemic dynamics indicate a narrowing gap between US and international earnings growth. "We anticipate that pockets of earnings growth in Europe and Japan will keep pace with the US, and a broader range of sectors look capable of delivering appreciation. Defence and financials are two notable examples," Janvier explained.
Furthermore, small-cap stocks may see enhanced support, propelled by favorable interest rate trajectories. "The path of interest rates will be stimulative for companies more closely geared to the economic cycle," Robson added.
As investors construct and monitor their portfolios, they are urged to be mindful of potential risks and hidden concentrations. The evolving investment cycles, especially relating to AI, necessitate thorough analysis to ensure strategic positioning in a diverse range of sectors. "We contend that investors should also be wary of hidden concentrations—especially as the AI investment cycle diffuses," stated Janvier.
In summary, the optimistic outlook for equity markets in 2026 hinges on robust earnings potential and the strategic diversification of investments. With the backdrop of supportive economic policies and transformative technologies, investors appear well-positioned to harness growth across a broad spectrum of sectors and regions. As this new environment unfolds, monitoring market nuances and adaptability will be essential for achieving long-term investment success.