The global equity landscape entering 2026 is shaped by a recalibration of trade policy, a shift toward more accommodative monetary settings, and the continuation of a powerful investment cycle in artificial intelligence infrastructure. Markets have transitioned from fears of a hard landing in 2025 toward conditions more consistent with a mid-cycle environment. Early turbulence, including the sharp reaction to April’s tariff shock, ultimately gave way to renewed equity momentum as policy adjustments reassured investors and supported risk assets. Monetary easing in the latter part of the year further reinforced this backdrop.
Rhynhardt Roodt, Chief Investment Officer, Equities, notes the turning point in market sentiment: “The key surprise of the year was April’s tariff shock, which raised fears of stagflation and a global recession. However, this was short-lived with economic growth and equities rebounding strongly.” AI-related capital expenditure remains a defining structural driver, particularly across hardware, semiconductors, manufacturing tools and power infrastructure. Software, while benefitting from long-term opportunity, faces near-term competitive and margin pressures.
The global opportunity set is also widening geographically. Fiscal support across Europe, attractive UK valuations, and reform momentum in Japan are contributing to a more balanced regional picture. Improving dynamics in select Asia ex-Japan markets, along with industrial and financial sectors tied to the AI and capital-investment cycle, further illustrate the expansion of investable themes. Dan Hanbury, Portfolio Manager, Global Equities: “Europe’s fiscal stance, EM valuations, and Japan’s reform tailwinds could point to more balanced contributions to returns. Within the US, only Nvidia and Alphabet amongst the Mag 7 have outperformed during 2025.”
We expect the US equity market to evolve toward a broader, more idiosyncratic opportunity set. The anticipated broadening was delayed through 2025 by policy uncertainty around tariffs and taxation. That uncertainty has now largely cleared. With greater visibility on pro-growth tax policy, company management teams, whose incentives remain tightly aligned with earnings delivery and share price performance, are increasingly guiding above consensus expectations, doing so roughly twice as often as guiding below. This points to a healthier dispersion backdrop, where stock-specific fundamentals should matter more than index-level narratives.
Hanbury noted: “On artificial intelligence, we would caution that expectations have short-term run ahead of near-term reality. Monetisation remains uncertain, while power infrastructure is a binding constraint that will take time and capital to resolve. For now, markets are largely capitalising the promise rather than the cash flows. Hyperscalers have become more capital-intensive than the oil majors were at their peak, with aggregate capex on track to approach half a trillion dollars by 2026. To date, much of this investment has been funded through operating cash flow, but recent debt issuance marks a clear inflection point.”
In this environment, return on incremental invested capital relative to the cost of capital is a critical anchor for valuation discipline. While the current spread for most hyperscalers remains positive, it is healthy rather than exceptional. As companies scale, the scope for incremental returns is likely to compress, particularly as the growth tailwind from share gains in traditional advertising moderates. Historically, sustained improvements in ROIIC have been a powerful source of alpha - and today this opportunity set is unusually diverse, spanning both tech and non-tech businesses.
Europe enters 2026 with its strongest alignment of fiscal policy, monetary support and structural reform in more than a decade. A pro-growth policy framework, accelerated by renewed focus on industrial competitiveness, defence investment and long-term infrastructure modernisation, is reshaping perceptions of Europe’s economic potential.
The groundwork for this shift was laid in 2025, when new strategic direction for industrial transformation and critical infrastructure investment gained momentum across the region. This coincided with a more dovish European Central Bank and an evolving geopolitical environment, strengthening the case for meaningful and sustained domestic demand.
Looking at the significance of the policy foundation, Ben Lambert, Portfolio Manager, European Equities, said: “The seeds of many of 2025’s key events were sown in the Draghi report, which identified €845 billion of critical infrastructure investment needed by 2040 to modernise Europe’s ageing grids, transport links and industrial backbone.” Germany, in particular, stands at the centre of Europe’s fiscal capacity. Proposed multi-year investment programmes and reforms to long-standing budget constraints point to a meaningful uplift in medium-term spending on infrastructure and defence.
Adam Child, Portfolio Manager, European Equities: “Germany is uniquely positioned… and its proposed €500 billion infrastructure fund… could deliver a fiscal impulse of 3–4% of GDP by 2027.” European equity valuations remain compelling relative to both history and global peers, with earnings expectations improving toward parity with the US on a forward-looking basis. At the same time, participation across sectors has broadened. Banks in select peripheral markets, defence industries and power-equipment suppliers are already reflecting the changing backdrop and capital-expenditure priorities.
Noting the disconnect between valuations and fundamentals, Lambert stated: “The asset class is trading on about 14x forward earnings, a 40% discount to the US… However, this doesn't match up with the forward-looking view of earnings. We regard that as an opportunity.”
Across global markets, 2026 is characterised by widening opportunity but also by heightened dispersion. Structural tailwinds, including the AI infrastructure cycle, substantial fiscal mobilisation in Europe, and reform momentum in key regions, create a broader and more diversified investment landscape than in previous years.
At the same time, elevated macro uncertainty, policy shifts and concentration risk require a disciplined approach to portfolio construction. Roodt said: “This translates into a disciplined approach… aimed at providing a balanced, core, style-agnostic portfolio, driven by a laser focus on stock selection.”