Multi-asset outlook Part 1 – Equities 2026: US equities remain a core component of the portfolio
- The environment for stock markets remains positive in 2026
- US stocks, emerging market securities, and defensive sectors look promising
- Artificial intelligence is both a market driver and a risk factor
FERI believes that the market environment for equities will remain positive in 2026. This is what the experts at the multi-asset manager write in their latest annual outlook. “Positive factors include fiscal policy stimuli and further interest rate cuts,” says Nikolaos Soumelidis, Head of Fundamental Equities at FERI. On the other hand, risks arise from inflation trends in the US: rising interest rates or disappointments in the monetary policy of the US Federal Reserve (Fed) could lead to a deterioration in the market environment.
From a regional perspective, US equities remain a core component of any asset allocation for FERI in 2026 despite high valuations, thanks to the innovative strength of US companies – even if temporary corrections are possible. In Europe, the consistent implementation of structural reforms is lacking for sustainable outperformance, while favorable valuations and fiscal stimulus are among the positive factors. Japanese equities are starting the new year with elevated valuations, while Chinese equities offer attractive valuations, strong expertise in artificial intelligence (AI), and potential fiscal stimulus for catch-up potential. In emerging markets, the environment is positive thanks to stable inflation rates and scope for interest rate cuts, especially as the strategic downward trend of the US dollar is providing additional support.
Defensive sectors offer catch-up potential
At the sector level, defensive stocks appear poised to outperform in the coming year, while cyclical stocks could face a period of consolidation. “We believe defensive quality stocks in the consumer and healthcare sectors are attractive. Here, the potential negative factors associated with Trump's agenda already appear to be largely reflected in prices,” says Soumelidis. “Given the comparatively moderate valuations, this results in substantial catch-up potential.”
The most important factor for stock market performance remains progress in AI applications. “The AI boom is likely to be both a positive market driver and a risk factor,” Soumelidis emphasizes. Dynamic earnings growth is offset by very high valuations with speculative elements. In addition, opportunistic “financial engineering” is increasingly being observed: high stock market valuations are being used to further fuel profit momentum through circular investments and contract awards, which would cause valuations and market volatility to rise further.
Soumelidis comments: “Stock market history shows that temporary periods of disillusionment are to be expected with new key technologies. These can put pressure on the stock markets, at least temporarily, and lead to significantly higher volatility. However, a general collapse of the AI boom is not our base scenario due to the underlying fundamental drivers.”
