Real global growth continues at a pace of around 3%, led by emerging markets (EM). The US is moving from a consumption-led to an investment-driven growth model fuelled by interest rate cuts. A new US Federal Reserve (Fed) chair may mean a policy reset towards loose monetary policy, potentially boosting credit activity, housing investment, and accelerating the AI boom.
Where to invest in 2026? Our top picks
Equities
Our equity view is constructive but balanced, with global policy divergence creating a broader opportunity set. While AI remains a key performance driver, investors can diversify with defensive healthcare, Swiss equities, Europe’s cyclicals, and Asia-led EM strength. China is on the cusp of a secular bull market, while Japan, India, and Singapore also offer promise. Next Generation themes in focus are Cloud Computing & AI, Cybersecurity, and Clean Energy.
Fixed income
Bonds offer decent income, and steepness in major yield curves presents additional return potential. Positioning favours duration through high-quality investment-grade bonds paired with riskier shorter-dated credit exposure. Selective additions in EM corporates can provide extra carry without compromising on credit quality or increasing risk.
Currencies
The USD may weaken as slower growth and lower rates reduce the appeal of US assets, with strong outflows from trade deficits and high external indebtedness likely driving the currency lower. European currencies look attractive: the EUR should benefit from USD weakness, Eastern European currencies offer upside and carry potential, and Scandinavian currencies are undervalued. The CHF remains the safe haven of choice, while the JPY is fundamentally cheap but exhibits higher volatility.
Commodities
Energy moves into a new era with supplies evermore abundant, resulting in lasting pressure on oil and natural gas prices. The pillars of the bull market in gold remain in place: structural central-bank buying and cyclical safe-haven seeking. However, speculative trading heightens volatility, making sharp reversals possible, so investors should consider tactical hedging strategies and adding exposure on price weakness.
Europe is doubling down on infrastructure/defence spending to revive domestic demand amidst a deterioration in export competitiveness. Pressure on energy prices is an underappreciated positive factor for the continent. In China, AI innovation and competitive goods, with the latter driving a surge in non-US exports, reflect positive dynamics, while domestic demand remains the weak link. The government is curbing excessive industrial competition to ensure long-term self-sufficiency and resilience. In terms of investment styles, high-dividend/low-volatility stocks offer further diversification and generate income.
Alternative investments
Opportunities remain broad and attractive, with manager selection essential. In private equity, the outlook is promising, driven by anticipated exits among other factors. Within private credit, sponsor-backed senior secured direct lending stands out for its low expected loss ratios, with our strategy preference centred on Europe. Private infrastructure offers stable cash flows and growth, with unique exposure to data centres and power generation. Market-neutral hedge funds can preserve capital in volatile markets through uncorrelated strategies, in particular quantitative, long/short, and multi-strategy.
Digital assets
Positive industry dynamics were reflected in strong flows into digital asset products in 2025. At the start of 2026, macroeconomic factors are the main performance driver for the largest digital asset, setting the tone for the asset class as a whole. Looser US liquidity and a weaker USD may create a more favourable backdrop during the year. Shifting investor sentiment is likely to keep volatility high.
Frequently asked questions
1. How can investors diversify currency exposure amid a weakening US dollar?
To diversify USD exposure, investors can consider European currencies, particularly the EUR. The AUD offers sustainable competitive yields, while safe havens such as the CHF and SGD offer stability and resilience during risk-off periods. Importantly, there are also compelling investment assets to be found in these currency regions. Gold, for its part, also merits attention.
2. Despite recent performance, does gold still remain a reliable hedge?
Our managed portfolios hold a tactical overweight in gold vs the strategic benchmark. This reflects not only favourable fundamentals but also its role as an effective portfolio diversifier. Unlike bonds or equities, gold does not rely on the solvency or goodwill of any issuer, a valuable property in an environment marked by geopolitical tension.
3. Are digital assets a good alternative to traditional currencies, and what key factors should investors consider before allocating to them?
Digital assets with disinflationary design, such as the largest digital asset, are not likely to be practical substitutes for paper currencies, as they are unsuitable as a means of exchange or source of liquidity in a growing global economy. Before allocating to digital assets, investors should assess the fundamental outlook for the asset class and their own risk tolerance, identify appropriate exposure methods, and be ready to rebalance periodically to maintain a desired allocation, as with any investment.
Note concerning digital assets for UK clients
Do not invest unless you are prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more (sites.julius baer.com/da_uk)