Market insights and portfolio ideas

THIS VIDEO IS MARKETING MATERIAL

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.

Despite an uncertain geopolitical and economic backdrop and, concerns about stock market valuations at certain points this year, investor sentiment has been strong, on the whole. Many stock market indices hit all-time highs, and investors added to stocks, bonds and alternatives like gold – making it a record year for inflows into exchange traded products!

Investors leaned into areas of the market that they perceived as having more growth potential, essentially adding risk to their portfolios, but they did so in a cautious and controlled way.

This aligns with our winter outlook: we see room to selectively add risk in 2026, while balancing portfolios with diversified income sources.

In our first theme, alongside US tech stocks – where we still see longer-term opportunities from AI and other tailwinds – we see value in also adding to more defensive sectors, such as US healthcare. Companies in the sector have relatively strong balance sheets, steady cash flows and predictable demand – offering ‘defensive growth’ – meaning the sector may be well positioned to hold up when the broader economy slows. Healthcare valuations look appealing, with stocks in the sector generally trading at relatively cheap levels. Earnings growth has also been a tailwind: US healthcare sector earnings growth came in 12% higher than expected in Q3. Together, these are signs that investors may still be underestimating its potential.

In our second theme, we highlight how ‘income stocks’ could serve as a source of resilience. Adding exposure to stocks that pay regular dividends can help cushion portfolios, while allowing investors to still benefit if share prices rise. We see potential opportunity in UK dividend stocks, which tilt towards sectors that we like and offer relatively attractive income, in our view. For investors, this level of income could potentially help smooth returns when markets are choppy.

We see potential opportunities in emerging market (EM) stocks, as a way to diversify portfolios and seek to tap into different tailwinds versus developed market stocks. China offers alternative tech exposure, while India provides a more defensive, less tech-heavy option that tends to be steadier when global tech stocks experience volatility. Broad EM allocation could potentially help to reduce reliance on any single country or theme.

See our latest report, Turning views into action, for more on these three themes.

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Risk Warnings

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.

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