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Risky assets are expected to outperform in 2026 as investors ride the artificial intelligence (AI) boom, supported by easing fiscal and monetary policies and abating trade tensions, highlights a report by Standard Chartered Bank.
However, the gains are likely to be accompanied by greater dispersion across asset classes, the report noted. According to the report, "We expect risky assets to outperform in 2026 amid an AI boom, easing fiscal and monetary policies and abating trade tensions." At the same time, it cautioned that wider-than-usual outcomes across markets call for diversification across a broader range of asset classes. The report shared three key investment themes for 2026. The first theme focuses on equities, described as "inflating markets, inflating AI debate." The report said AI-driven earnings growth is expected to overcome elevated valuations, keeping the outlook for equities constructive. Markets are expected to push higher through the year, led by the United States and Asia ex-Japan. However, investors are advised to diversify as valuation concerns remain. The second theme centres on income, with emerging market (EM) bonds expected to outperform developed market (DM) bonds. The report said EM bonds, denominated in both US dollars and local currency, offer attractive yields and diversification away from a Fed-centric outlook. The report is overweight on EM bonds and views them as a strong source of yield within a multi-asset income strategy, alongside equity income assets. The third theme highlights diversifiers under the heading "chasing glitter." The report expects gold to extend gains in 2026 and said demand for alternative strategies and currencies such as the Japanese yen (JPY) and Chinese yuan (CNH) will remain important for diversification. It added that major central banks and investors continue to look for alternatives to the US dollar, a trend that has not yet run its course. On risks, the report flagged potential disappointment with AI, a contagious credit event, a reversal in Federal Reserve policy or a hawkish Bank of Japan as key concerns. The report also added that while optimists argue equities remain in a bull market supported by strong AI-led earnings growth and supportive policies, pessimists warn of bubble-like valuations, sticky inflation and rising bond yields. The report outlined that major asset classes are expected to continue inflating, led by equities, but stressed the need to plan for a wider range of scenarios in 2026. (ANI)
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