Eyes Wide Open: A Year Of Vigilance And Selectivity

(MENAFN- Khaleej Times) We just released our 2026 Global Investment Outlook. In this annual exercise, we share our views, many of them quantified, about the investment landscape in the year ahead. As we are often asked why we do this in February and not in November like many of our competitors, the answer is simple: we always look back at the previous year to report on our calls for the previous year. Accountability is everything in wealth management.

So, let's start with a look at our 2025 Outlook, titled“Winds of Change”. In summary, while we expected an overall supportive backdrop of resilient growth, moderating inflation and monetary easing, we anticipated a year defined by two disruptive forces: bold political leadership and transformative new technologies. Looking back, we are happy and certainly not unlucky to have been right on both the economic scenario and the impact of these two drivers. All asset classes were positive, a classic outcome of a“goldilocks” backdrop. But there was more, the Winds of Change left marks everywhere: a falling dollar, gold prices skyrocketing, emerging assets outperforming, and AI leading the equity sector hierarchy. With USD returns between +13% and +20%, our strategies outperformed global peers by our widest margin ever. Now let's be humble: we expected positive returns, but our forecast was much lower, half of what we delivered. This is our mistake, even if it's one we can really live with.

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Bottom-line, 2025 was about the turn, and 2026 is about the journey itself, a long one, into a new world defined by deep tech-driven transformation and a shifting global balance of power.

If we add that the global economy continues to show resilience, that inflation is not drifting higher, and that central banks should continue to provide liquidity and a few rate cuts, this looks a lot like last year.

And to some extent, it is absolutely“more of the same”. There are, however, important differences. First, the macro visibility is deteriorating. The short-term is fine, with continued corporate investments (in AI and beyond, as required by self-sufficiency), and a solid consumption which could even be supported by some tax refunds in the US. The problem is that hiring is soft, not to say weak. In case it continues or even deteriorates further, activity could materially slow down. In case it rebounds, inflation risks could come back and trigger reactions from central bankers. Another difference is that after a very positive 2025, valuations in 2026 are not as attractive as they were. Finally, while many market participants were worried last year, ranging from skeptical to outright apocalyptic, this is not the case anymore. We see much more optimism, extremely active retail investors, and a worrying level of short-term speculation, including on precious metals.

In essence, we have“more of the same” in terms of economic backdrop and secular forces, with less visibility, less upside potential, and more vulnerability from behavioral factors.

So, how do we invest?

We have titled our 2026 Global Investment Outlook“Eyes Wide Open”: this is a year for vigilance and selectivity. Vigilance, because we will experience massive volatility, and by contrast to 2025, we will not just try to stomach it, but try to take advantage of it. Selectivity, because all countries, companies, projects and issuers will win, and asset classes will react differently to uncertainty, especially when investors' positioning is extreme.

First and foremost, we have reshuffled our long-term strategic asset allocation to take into account the long-term implications of the two transformative forces we mentioned: technology, and a new balance of power. Bottom-line, this implies less US assets, less government bonds, more emerging markets and more alternatives. While we are confident in the ultimate benefits of technology, we foresee a period of resources scarcity which, combined with geopolitical antagonisms, makes the investment playbook a bit more complex. And less rewarding.

Then there is our tactical positioning. We expect visibility to deteriorate at some point, but not necessarily now. We started the year fully invested, with also“more of the same” in terms of positioning. We overweight gold and emerging markets across stocks and bonds. As we write in early February, we just experienced a crash in precious metals, with gold losing over 10% from its recent peak and silver at -25% - in just two days, following the announcement of the next Fed chairman. This perfectly illustrates markets in 2026, when uncertainty meets extreme speculation. We clearly do not believe that Mr. Kevin Warsh is as“hawkish” as the crash in precious metals suggest. If anything, we see his nomination as a choice of credibility and responsibility. Bonds and stock markets seem to agree with us. But metals were all about speculation and leverage. Interestingly and despite a very generous allocation to gold, our three profiles have a strong start to the year.

Now let us be clear: 2026 is not a year to be complacent. We are confident in the robustness of our reshuffled strategic allocation, but we know we will have to adapt our tactical positioning to changing events and market action. Finally, but crucially, there are more specific opportunities below the line of asset allocation than at the asset class level. As we write, again, in early February, there is already more than a 20% gap between the best and the worst member of the Magnificent 7, to illustrate. In our report, we highlight specific opportunities within bonds, including in the GCC, as well as equity themes from Chinese tech to Japanese banks or memory manufacturers.

The writer is Group Chief Investment Officer, Wealth Management at Emirates NBD.

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