Last year’s exceptional performers, like gold, provide clues — and there’s definitely a case for global exposure in your investment portfolio too. As we head into the second month of the year, it’s a good time to re-examine your investment portfolio. Having just come out of a strong multiyear equity run and elevated valuations, investors need to be more deliberate about where returns can realistically come from, and which assets serve as protection when growth or inflation shocks hit.
Key themes that dominated the investment landscape last year included artificial intelligence (AI), both as a tool and an investment theme, geopolitical risk, inflation and interest rates. Mike Coop, Morningstar Investments’ chief investment officer for Europe, the Middle East and Africa, says that in an uncertain world, tendencies associated with behavioural finance have become more prevalent. “We’ve seen that behavioural overreaction to news flow, and we think that will continue to be the case.” He adds that as 2026 gets under way, investors need to be mindful of how much optimism is baked in and the sensitivity of markets to news flow.
Coop says return drivers are assets that are expected to give better than usual returns, either because they are mispriced in some way or the fundamentals might be, at the moment, not as good as they could be. Examples he includes in this category are Chinese equities and emerging market bonds. “These are markets that offer an array of opportunities, where the mispricing comes from different sources, and that means that when you add them together, they all behave and move in lockstep.
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“There are different factors there that range from commodities through to AI spend through to geopolitical mispricings through to recovery in the economy.” Coop says smaller US companies are another part of the capital markets that have been overlooked. “They are really starting to perform much better this year.” He points out that diversifiers are assets expected to hold up, or move differently, when risk assets struggle. Examples are world consumer staples and healthcare.
In a continuing bull run, the price of gold recently broke the $5,000 per ounce mark. James Luke, senior portfolio manager of gold and commodities at Schroders, says if one looks at the average price ratio of gold equities to gold bullion over the 2022-2024 period, gold equities are about 25% higher despite a completely transformed margin and returns environment.
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