Johanna Kyrklund, Group Chief Investment Officer, Schroders, said: “As we head into 2026 there is a lot of concern about equity market valuations and comparisons are being drawn with the dotcom bubble. Looking at market valuations, we think that equity markets are still supported by the fact that bond yields are well-behaved, inflation is quiescent for now, and central banks are likely to ease a bit more. Over the medium term, I am concerned about mounting government debt levels and the potential for inflation to accelerate, leading to higher discount rates, but over the next six months this risk is low. We also see low risk of US recession - although the labour market is softening, unemployment is still low and private sector balance sheets are in good shape. At market level, we still see positive returns from equities.
“So for 2026, we see a low risk of recession, contained bond yields and earnings momentum which leads us to stay positive. The waters are getting choppier but we still see ways of navigating them to get to our destination. It is too soon to seek shelter.”
Private Markets: Decoupling driving resilient opportunities
Amid continued macroeconomic and geopolitical volatility, private markets benefit from both cyclical and structural tailwinds that allow them to play a key role in diversified, resilient portfolios.
Nils Rode, Chief Investment Officer, Schroders Capital, said: “Resilience has become the key watch word for investors in an era shaped by persistent uncertainty. The surface calm of markets today masks a complex backdrop. Inflation remains sticky, fiscal pressures are building, and geopolitical flashpoints continue to test global stability. Periods like this challenge investors to look beyond short-term momentum and focus instead on the durability of returns – and on bottom-up value creation. In this context, private markets can be seen as a key area where cyclical and structural forces are aligning to create opportunity.
“Private markets are at a different stage of the cycle. Fundraising, deal activity and exits have broadly all fallen over the past several years, which has fuelled a valuation reset across asset classes and segments. As we move toward 2026, the most successful investors will be those able to combine steady deployment with selectivity. Private markets, with their long-term capital and active engagement, are not immune to uncertainty – but they are well positioned to contribute to diversified, resilient portfolios.”
Global equities: The case for cautious optimism
Understanding the unique drivers and risks present in specific markets, sectors and companies remains essential for navigating the global equities landscape.
Alex Tedder, Chief Investment Officer, Equities, Schroders, said: “Notwithstanding market concentration, relatively high valuations and rising fears about a potential AI bubble, the outlook for global equities isn’t necessarily negative. Positive economic momentum, robust earnings support and structural investment in new technologies may underpin global markets for a while yet.”
Tom Wilson, Head of Emerging Market Equities, Schroders, said: “EM equities have performed strongly in 2025, outperforming global equities. We are inclined to anticipate US dollar depreciation on a structural basis would provide a tailwind to EM relative equity performance as it eases financial conditions and has a positive translation effect, benefitting dollar-nominal growth and earnings. This may combine with attractive relative valuations, and a potential stabilisation or improvement in relative return on equity. Key risks include a rollover of the AI theme, geopolitical tension and policy volatility. However, whatever the challenges, we believe EM equities continue to offer value and that investors can benefit from the diversification benefits and active investment opportunities that this market provides.”
Global fixed income: Desynchronised cycles and attractive opportunities
As global fixed income investors look toward 2026, the landscape is shaped by cycles that are increasingly out of sync across major economies, with the trajectories for inflation, monetary policy and economic growth diverging across regions.
Julien Houdain, Head of Global Unconstrained Fixed Income Schroders, said: “2025 has been a year of differentiation in bond markets, with very large divergences in yield moves, both between geographies and at different maturities of the curve. We expect this to continue as we head into 2026. This provides huge opportunity – but only to those who are active in their bond allocation and capable of taking advantage of fast-changing and disparate economic conditions globally. Passive management in this environment could leave portfolios overallocated to the relative ’losers’ as yield moves diverge, and that could lead to underwhelming returns and greater risks.”
Lisa Hornby, Head of US Fixed Income, Schroders, said: “US fixed income markets continue to benefit from moderating inflation, more stable fiscal dynamics and a resilient - if slower - economy. In this environment, high-quality sectors such as agency MBS and long-dated tax-exempt municipals should remain well positioned in 2026. The strong performance in 2025 reinforces the thesis that starting yields matter, and investors who focus on quality and value are likely, in our view, to be rewarded as supportive conditions carry into next year.”
Abdallah Guezour, Head of Emerging Market (EM) Debt and Commodities, Schroders, said: "As global investors are now starting to recognise the macroeconomic adjustments experienced by key EM countries in the post-pandemic period, a recovery in portfolio flows to EM fixed income markets is underway. With the dollar having broken its 15-year uptrend this year, the currency cycle appears to be turning in favour of non-US assets outperformance. This environment, combined with abundant global financial liquidity, reinforces the relative attractiveness of EM debt, particularly in local currency segments. We continue to favour markets such as Brazil, Mexico, South Africa, India and parts of Central Europe, where valuations remain compelling and policy flexibility is high.”
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