Thought leadership

2026 Investment Outlook

December 1, 2025
Invesco Investment Solutions
Invesco Global Market Strategy Office
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Key takeaways

Market outlook

1

2025 was marked by uncertainty, yet markets and economies displayed a lot of resilience. As we look ahead to 2026, we believe the conditions are in place for stocks to potentially advance.

Economic reacceleration

2

We believe lower interest rates in the US and greater government spending in Europe, Japan and China should help lift the global economy out of a mid-cycle slowdown.

Investment implications

3

A pickup in global economic activity could unlock value across a wider range of areas, including non-US markets, smaller-cap stocks and cyclical areas in the US.

2025 was a year marked by uncertainty, yet risk assets delivered strong returns,1 culminating in what could be described as an “almost everything” bull market. As we look ahead to 2026, we believe the conditions are in place for the market advance to continue.

Our outlook, Resilience and rebalancing, reflects two key themes:

Resilience

The private sector has demonstrated a remarkable ability to absorb economic shocks, in our view, supported by healthy corporate and household balance sheets with limited leverage and excess according to our analysis. We expect this resilience to be further bolstered by policy easing in the United States and fiscal support across Europe, Japan, and China. These stimulus measures should help lift the global economy out of what we view as a mid-cycle slowdown.

Rebalancing

While US equity markets, particularly the tech sector driven by the AI trade, are at elevated valuations, we see compelling opportunities elsewhere. Valuations are more attractive in non-US markets, smaller-capitalization stocks, and cyclical sectors within the US. A pickup in global activity could unlock value across these areas, contributing to a more balanced market leadership.

We enter 2026 with optimism, confident in the private sector’s durability, inclined to not fight global policymakers, and mindful of the need for diversification as the market narrative evolves.

Investment themes

  • Potentially better growth, broader participation
    A reacceleration from a mid-cycle slowdown lays the groundwork for greater market participation and cyclically-oriented sectors.
  • A weaker US dollar
    Central bank policies diverge, weakening the dollar and supporting the groundwork for emerging market assets.
  • Reducing AI concentration risks
    Key players in the AI theme have become expensive, but a clear catalyst for consolidation remains unclear. We prefer rebalancing to manage concentration risk.
  • Emerging market strength
    Better global growth, few EM inflation pressures, and a weaker USD should bode well for emerging market asset performance in 2026.
  • Private credit offers diversification
    A more benign risk environment, better growth, stable inflation, and easier US monetary policy are conditions where we expect private credit to perform well.
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  • 1

    MSCI World Index returned 17.5% year-to date through the end of October. Source: Bloomberg L.P., and Invesco Strategy & Insights, as of October 31, 2025. Past performance does not guarantee future results. An investment cannot be made directly into an index.

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