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2026 Exposures for today’s markets
Investment Directions
Investment Directions 2026 brings together our highest-conviction views on growth, income and resilience. We explore how investors can navigate changing market dynamics by broadening AI exposure, diversifying income and strengthening portfolios.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
The Short List: Investment Directions for 2026 (product version)
Speaker: Karim Chedid
FOR PROFESSIONAL CLIENTS ONLY
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(Text banner: Investment Directions for 2026)
We continue to see opportunities for growth in, around and beyond AI.
We still believe in the AI-buildout theme that drove markets in 2025, but in 2026 we’re focused on diversifying beyond mega-cap tech to support more resilient risk-taking.
(Short List animated intro)
Welcome to The Short List: a roundup of our highest-conviction ideas for 2026 across asset classes.
(Text banner: 2026: Exposures for today’s markets)
Over the past year, investor sentiment and portfolio positioning have moved in opposite directions. AI concerns, macro volatility and geopolitical risk have dominated headlines. Our client surveys show a steady decrease in self-reported bullishness over 2025 and global gold ETP AUM hit a record high. Yet at the same time, the S&P 500 reached successive all-time highs, and global ETPs gathered record inflows.
In other words, investors have cautiously stayed risk on, incrementally shifting exposures into alternatives and commodities, reflecting a desire for diversification rather than derisking.
This pattern of cautious risk-taking animates our themes for 2026.
(Text banner: Growth: in, around and beyond AI)
Firstly, we continue to see opportunities for growth in, around and beyond AI.
We still believe in the AI-buildout theme that drove markets in 2025, but in 2026 we’re focused on diversifying beyond mega-cap tech to support more resilient risk-taking. In AI, we favour high-conviction alpha-seeking strategies that target innovation and allocate dynamically across the AI stack. These can lean into dispersion and capture dislocations as earnings broaden beyond the Magnificent Seven.
Around AI, we favour broadening exposures through AI enablers and diversifiers. Private markets offer early exposure to structural themes such as the AI buildout. We see strong tailwinds for sustainable energy, supported by AI energy demand, supportive policy and easier financial conditions.
(Text banner: Income: leaning into flexibility)
Secondly, we continue to seek income, leaning into flexibility.
In a world of tight spreads, uncertain policy paths and volatile rates, income is the dominant driver of fixed income returns. We also see income as source of portfolio resilience, cushioning any potential hits to growth exposures. We focus on income sources that are high-quality, diversifiable and anchored in robust fundamentals, across euro duration, a rich euro multi-credit universe, including securitised exposures and exposures across Emerging Market debt (EMD). We look to complement fixed income exposures with systematic equity income for attractive yield and upside participation in multi-asset portfolios.
(Text banner: Resilience: diversifying diversifiers)
Finally, we look to build resilience by diversifying diversifiers in a period of persistently higher volatility and less reliable stock-bond correlations. Outcome-based buffer strategies can help manage drawdowns, using options to deliver predefined downside protection and capped upside participation, helping investors stay invested without disrupting overall asset allocation. Hedge funds offer uncorrelated alpha and dynamic downside protection. Currency-hedged share classes or outsourcing FX management to skilled managers can support portfolio stability as the role of the US dollar (USD) as a volatility buffer continues to shift.
Please see our latest Investment Directions report for more on these exposures.
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We're focused on strategic diversification in 2026. We see merit in selectively adding to risk, while balancing portfolios with diversified income sources and a broader resilience toolkit."
— Karim Chedid, Head of EMEA Investment Strategy
Growth: in, around and beyond AI
In AI, we favour high-conviction alpha-seeking strategies that target innovation and allocate dynamically across the AI stack.
Around AI, we favour broadening exposures through AI enablers and diversifiers. We see private markets offering early exposure to the AI buildout theme.
Beyond AI, we seek to manage concentration risk in US equities and identify different sources of growth across sectors and regions.
Today’s US market is historically concentrated – but the earnings outlook isn’t. With the rest of the S&P 500 expected to catch up to the Magnificent 7 in EPS growth through 2026, it’s increasingly important to risk-manage mega cap and AI exposure while also capturing differentiated upside opportunities.
Ibrahim Kanan
Head of Core US Equity, Fundamental Equities
Income: leaning into flexibility
We focus on income sources that are high-quality, diversifiable and anchored in robust fundamentals, across euro duration, a rich euro multi-credit universe (including securitised exposures) and Emerging Market Debt (EMD). We look to complement fixed income exposures with systematic equity income for attractive yield and upside participation in multi-asset portfolios.
In a yield-seeking world, flexibility matters. IG (investment grade credit) is already highly owned in EMEA, creating an opportunity to optimise the core and add to ‘plus sectors’ for improved diversification and risk-adjusted income, as ETF innovation expands access.
Vasiliki Pachatouridi
Head of iShares Fixed Income Product Strategy EMEA
Resilience: diversifying diversifiers
Outcome-based buffer strategies can help manage drawdowns, using options to deliver predefined downside protection2 and capped upside participation. Hedge funds could offer uncorrelated alpha and dynamic downside protection. Currency-hedged share classes or outsourcing FX management to skilled managers can support portfolio stability amid US dollar (USD) volatility.
Today’s combination of narrow equity leadership, unreliable stock-bond correlations and macro uncertainty elevates the value of portfolio diversifiers. Clients are rethinking portfolios and prioritising allocations to differentiated return sources, particularly long/short alpha strategies.
Tom Becker
Senior Portfolio Manager, Global Tactical Asset Allocation
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1Diversification
Diversification and asset allocation may not fully protect you from market risk.
2Risk Management/ Downside management, protection or mitigation
Risk management cannot fully eliminate the risk of investment loss.
