Please see the below commentary from Invesco outlining their investment outlook, key themes and takeaways for 2026 – Received on 10/11/2025.
2025 was a year marked by uncertainty, yet risk assets delivered strong returns,1 culminating in what could be described as an “almost everything” bull market. As we look ahead to 2026, we believe the conditions are in place for the market advance to continue. Our outlook, Resilience and rebalancing, reflects two key themes:
Resilience
The private sector has demonstrated a remarkable ability to absorb economic shocks, in our view, supported by healthy corporate and household balance sheets with limited leverage and excess according to our analysis. We expect this resilience to be further bolstered by policy easing in the United States and fiscal support across Europe, Japan, and China. These stimulus measures should help lift the global economy out of what we view as a mid-cycle slowdown.
Rebalancing
While US equity markets, particularly the tech sector driven by the AI trade, are at elevated valuations, we see compelling opportunities elsewhere. Valuations are more attractive in non-US markets, smaller-capitalization stocks, and cyclical sectors within the US. A pickup in global activity could unlock value across these areas, contributing to a more balanced market leadership. We enter 2026 with optimism, confident in the private sector’s durability, inclined to not fight global policymakers, and mindful of the need for diversification as the market narrative evolves.
Key takeaways
We see global growth reaccelerating
Lower US policy rates and greater fiscal spending in Europe, Japan, and China should lead to an improved global growth trajectory next year—and higher global equity markets.
The Federal Reserve (Fed) is cutting rates
With many major central banks on hold, Fed cuts should contribute to a soft dollar environment. Falling costs for hedging US dollar (USD) exposure are likely to encourage investors to increase hedge ratios and exert downward pressure on the dollar.
The US dollar has weakened and growth outside the US has the potential to increase
We expect a weaker USD and better growth outside of the US to support performance of non-US assets, especially emerging market (EM) equities and EM debt.
Amid expensive valuations, we prefer rebalancing
We reduce allocations to expensive parts of the market, particularly large US artificial-intelligence (AI)-related stocks, and look for other opportunities. Alternative assets remain attractive in our opinion with comparatively better valuation opportunities, and we see fundamentals improving in a falling rate environment.
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Marcus Blenkinsop
30th December 2025