Invesco Releases 2026 Investment Outlook “Resilience and Rebalancing”

Hong Kong, December 4, 2025 – Invesco today released its 2026 Investment Outlook with insights on expectations for global markets and asset implications. The Outlook from Invesco’s Strategy & Insights group anticipates global stocks to rise further, continued interest rate cuts in the U.S., and fiscal support across Europe, Japan, and China.

“We enter 2026 with optimism, confident in the durability of businesses, encouraged by the direction of central banks and fiscal support, and mindful of the need for diversification as the market evolves,” said Brian Levitt, Chief Global Market Strategist, Invesco. “2025 was a year marked by uncertainty, yet economies displayed resilience and markets delivered strong returns¹. We believe global equities may continue to rise in the new year and expect new opportunities to be unlocked as market leadership evolves.”

Investment Themes

Resilient economies and markets set the stage for reaccelerating growth. We believe solid corporate and household balance sheets and lower leverage than in previous cycles form a base on which global growth can potentially improve.

Strong growth abroad. While Eurozone growth has been disappointing in recent years, policy is turning positive for the region. A ramp-up in fiscal spending from Germany should start to take effect in early 2026. Meanwhile, China’s policy support is expected to keep growth on track despite external pressures. Japan is experiencing a structural return of inflation that has helped ignite a virtuous cycle where consumption is climbing alongside nominal wages, which should help drive nominal growth higher.

China is likely to continue to support its economy with targeted government action alongside a turn to high-quality growth. We expect Chinese growth in 2026 is likely to be close to 5%, helped by easing monetary policy and fiscal stimulus that should support infrastructure investment and domestic demand. The 15th Five-Year Plan also emphasizes greater self-reliance, which comes from growing the domestic consumer base and retaining China’s leadership in innovation, especially in the AI and high-tech manufacturing sectors.

Private credit offers diversification. A more benign risk environment coupled with better growth, stable inflation, and easier U.S. monetary policy are conditions under which private credit could perform well. Private credit continues to be an attractive option for those seeking diverse sources of income beyond traditional credit.

Signs of continued strength emerging markets (EM). Central bank policies are diverging, weakening the U.S. dollar. A weaker U.S. dollar combined with better global growth and fewer EM inflation pressures should bode well for emerging market asset performance next year. Anticipated interest rate cuts from the Federal Reserve (Fed) in 2026 should also create room for EM central banks to continue lowering rates, supporting domestic demand and equity markets.

Broader participation as investors look to reduce artificial intelligence (AI) concentration. Key players in the AI theme have become expensive, prompting consideration for rebalancing to manage concentration risk. At the same time, reacceleration from a mid-cycle slowdown lays the groundwork for greater market participation and cyclically oriented sectors.

Investment Implications

“The current macroeconomic environment supports an overweight allocation to non-US assets,” said Levitt. “We believe lower interest rates in the U.S. and greater government spending in Europe, Japan, and China should help lift the global economy out of a mid-cycle slowdown.”

Within equities, the artificial intelligence theme has dominated global equity returns over recent years. We prefer to rebalance as concentration reaches multi-decade highs and look to opportunities in markets that stand to potentially benefit from improving global growth. Developed markets outside the U.S. offer more attractive valuations and greater potential for multiple expansion, supported by improving global growth and better earnings prospects. Emerging markets present the most compelling valuations among regions, though performance will vary widely. We also highlight other AI opportunities at more attractive valuations, particularly Chinese technology stocks.

In fixed income, EM local currency debt benefits from a weaker U.S. dollar and easing inflation pressures, supporting a favorable fiscal outlook. Developed market government bonds are less appealing as real yields have fallen, though they could rise if growth rebounds. Investment-grade credit remains tight but stable, with attractive opportunities in Europe. High yield is supported by improving growth and low default risk, making U.S. high yield slightly preferred.

In currencies, the U.S. dollar is likely to weaken with Fed rate cuts, favoring developed market currencies such as the yen and pound, as well as emerging market currencies with positive carry and improving fundamentals. Alternatives remain attractive, with private credit offering diversification and cryptocurrencies expected to perform well alongside risk assets amid growing adoption and supportive conditions. Industrial metals are expected to potentially benefit from stronger global growth and a weaker U.S. dollar, while precious metals may see limited upside as inflation remains stable.

"China and other Asian markets have already delivered strong performances in 2025, and multiple asset classes are poised to carry this momentum into 2026," said David Chao, Global Market Strategist for Asia Pacific, Invesco. “Against a backdrop of favorable policy support and improving fundamentals, Asian markets offer attractive opportunities for investors looking to diversify and rebalance portfolios in the coming year.”