With uncertainty and divergence set to characterise the investment outlook for the year ahead, Prescient Investment Management chief investment officer Bastian Teichgreeber says global markets will face four interconnected risks in 2026: stretched valuations, slowing economic momentum, uncertain financial conditions and complacent sentiment.
“Across asset classes, valuations are elevated, late-cycle dynamics are emerging and investors appear unusually relaxed about downside risk. And when the market stops worrying, we start worrying.”
Many investors are asking how long a still-resilient US market can sustain record-high valuations, while a softer Europe and a China growth path that is steady but exposed to property-sector and trade risks, add complexity to any decision to pivot away from the US.
Allan Gray portfolio manager Thalia Petousis confirms that global asset allocators began questioning whether they should hold such large positions in dollar-denominated assets this year and started to allocate slightly more to non-dollar assets at the margins of their portfolios.
“We expect this shift in thinking should continue in the new year. We have been highlighting for some time that it is important to look beyond the big winners of the past decade, both in terms of currency and shares, given that many dollar assets have become extremely expensive.”
Samira Hassanally, head of equity capital markets at Absa CIB, expects volatility to persist into 2026 as US policy and data reshape expectations.
“Major risks include elevated valuations, overreliance on AI-driven mega-caps and slowing US growth. These factors could test investor resilience in the year ahead, which is why staying anchored to fundamentals amid stretched valuations will be key.”
While job losses in the US are also concerning, Marius Oberholzer, head of multi-assets at Stanlib Asset Management, says they’re part of a broader AI-driven shift that could prompt new forms of policy support, such as quantitative easing.
Investors should lean into risk in 2026, maintaining equity exposure while being selective in their bond investments
— Marius Oberholzer
“Rate cuts and ongoing fiscal support should continue to underpin asset markets, creating a constructive environment for risk assets. As such, investors should lean into risk in 2026, maintaining equity exposure while being selective in their bond investments.”
Regarding equity exposure, Petousis says Allan Gray is focused on buying underowned shares that are trading at reasonable valuations and have strong fundamentals.
“Many of our offshore stock picks supply the nuts and bolts that support AI, such as energy infrastructure, chips and construction materials needed to build AI data centres. These resources are in short supply to meet the demands of this growing industry, which means we do not have to bet on technology winners and losers in the AI race, but can still participate in the sector in a way that protects against the risk of ruin for our clients.”
Among emerging markets, the World Bank predicts lower growth compared with pre-pandemic levels, with trade barriers and policy uncertainty trimming near-term prospects. However, select emerging markets have stronger macro buffers and can benefit from a softer US dollar.
South Africa could benefit in this regard and capitalise on strong mineral tailwinds. Unlocking this growth will require solid structural reforms, policy certainty and reduced wasteful expenditure to drive investment and capitalise on global trends, but SA Inc still offers opportunities after a standout performance in 2025.
“Encouragingly, we’ve seen renewed IPO activity on the JSE and strong investor support for equity issuances, signalling confidence in companies with solid fundamentals and credible management,” continues Hassanally.
“South Africa’s low growth remains a challenge, but select mid-cap and diversified businesses with sustainable strategies and defensive qualities stand out as attractive opportunities.”
Though Oberholzer says Stanlib Asset Management favours allocations to offshore over South African equities, the asset manager remains positive on local bonds and listed property.
“Globally, concentration risk is high, so diversification and flexibility are key. The world is being disrupted, and protected equity strategies look appealing as investors navigate this changing landscape.”
Faced with policy uncertainty and expensive assets, Teichgreeber says discipline and structure will outweigh speculation.
“Investors should rely on data, not narratives, using a scientifically calibrated asset allocation that integrates valuation, macro and sentiment indicators. Systematic investing isn’t about prediction but about measurement, calibration and adaptation. This is the foundation for resilience in an uncertain 2026,” he says.
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