Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

2026 Key Themes

Summary

As investors look to 2026, a number of key themes — from global policy stimulus to geopolitics to AI — are expected to shape macro and market conditions. In the US, the policy environment will support economic growth through rate cuts and fiscal stimulus, especially in the first half of the year. Likewise, Europe, China, and Japan are expected to carry out fiscal stimulus programs, and there may be opportunities in growth assets within countries pursuing these measures. Meanwhile, geopolitical risks are likely to impact markets: US-China economic decoupling continues to reshape supply chains, while the global race for AI supremacy and rising populist politics add complexity. Western nations face growing debt and deficit challenges, affecting fiscal policies. Diversification and a focus on resilient companies should be considered.

We believe that AI valuations remain broadly reasonable. Despite rising valuations in major tech firms, current price-to-earnings ratios are below dot-com bubble peaks and are supported by strong fundamentals. AI is transformative across sectors, but cautious monitoring is still necessary due to risks of over-optimistic adoption forecasts and complex financing arrangements within the AI ecosystem. Separately, we also discuss AI enterprise adoption. AI is reshaping business value creation, though enterprises are proceeding with caution due to governance and security needs. Overcoming data and cultural challenges will accelerate progress, enhancing productivity and innovation across industries such as health care and logistics. Investors should consider targeting companies with strong AI R&D and strategic partnerships.

Through the first three quarters of 2025, non-US equities have outperformed US stocks, driven by market volatility and a weaker dollar. Growth in Europe, reforms in Japan, and innovation in emerging markets highlight global opportunities, making this a potentially attractive moment to diversify equity exposure beyond the US. Meanwhile, we believe that global fixed income diversification is key: macro volatility and policy divergence make a global investment approach essential. The US faces challenges, including a weaker dollar and policy uncertainty, while emerging markets and global credit offer attractive opportunities to us. Rebalancing portfolios away from the US and embracing global credit and emerging market debt can help enhance diversification. Finally, corporate credit fundamentals seem likely to improve. With expected rate cuts in 2026, corporate credit fundamentals like interest coverage and cash balances are set to strengthen, supporting tight credit spreads similar to mid-1990s conditions. We think that investors should maintain credit exposure, consider global credit diversification, and monitor stress in private credit.

Download the full paper

 

  •   29 January 2026
  •      
  •   

 

Leave a Comment:

banner

Most viewed in recent weeks

Noel Whittaker’s take on the budget

Marketed as a fix for inequality and housing affordability, the latest budget instead delivers a tangle of tax changes that leave everyday Australians worse off.

Australia has no death duties. Technically.

Australia may not levy formal death duties, but a growing web of tax measures is quietly shaping what wealth passes between generations. Now, the 2026 budget adds another layer.

Lithium's rally is real this time – but no-one trusts it

The lithium rally mirrors the early-2010s tech stock surge, with demand set to double by 2030. Supply has been slow to respond, creating a market deficit for future tech like humanoid robotics and solid-state batteries.

Welcome to Firstlinks Edition 662 with weekend update

The debate over the budget is increasingly shaped by frustration and perceptions of unfairness, rather than clear-eyed assessment of policy outcomes.

How inflation is quietly moving the goalposts on retirement

Inflation doesn’t just raise today’s bills - it quietly increases the amount needed to retire, while simultaneously making it harder to save. Three steps to take before June 30th to improve retirement outcomes.

How to minimise tax with a will

Inheritance tax implications in Australia may surprise some, as poor estate planning without proper wills or trusts can lead to costly tax bills and delays for beneficiaries.

Latest Updates

SMSF strategies

Meg on SMSFs: The CGT changes don’t impact super but what about Div 296 tax decisions?

New CGT rules could tip the scales in the super vs non-super debate. For those facing the Division 296 tax, the case for withdrawing has gotten more complex. A "comparison rate" tool may help assess decisions.

Planning

Testamentary trusts post-budget: Estate planning, tax reform and the ‘death tax’ debate

Proposed Budget changes to taxation are casting new uncertainty over testamentary trusts, prompting closer scrutiny of estate planning structures and the real implications of reforms still taking shape.

Taxation

Income tax and bracket creep

Examining how five "tax cuts" stack up against bracket creep. Why offsets and incremental changes may do little to ease rising average tax burdens, compared to structural reform through indexation over time.  

Exchange traded products

The limits of a quality investing approach in Australia

Quality strategies shine globally, but Australia's concentrated market tells a different story. Limited diversification and sector dominance can constrain the defensive outcomes investors have seen in broader markets.

Investment strategies

Balancing opportunity and complexity

As private markets expand, investors face a growing mix of structures, a stabilising private equity cycle and uneven AI disruption. Fresh questions are being raised about where the real opportunities now sit.

Investment strategies

Why strong returns matter as much as generosity

As EOFY approaches, structured giving offers a tax-effective way to support charities, while allowing donations to grow over time and play a longer-term role in family wealth and legacy planning outcomes.

Investment strategies

The most important investment decision you’ll ever make

Stock picking often gets the spotlight, but research shows asset allocation explains the vast majority of long‑term returns. Understanding your mix of growth and defensive assets is the real key to investment success.

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.