Article Invesco Global Equity Income Trust plc - Q3 2026 update

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Markets delivered another strong quarter, but it feels like the same small group of companies continued to drive returns. How are you thinking about the market environment today?

One of the key questions investors need to ask themselves right now is: what is the cost of diversification?

Global equity markets delivered a solid return during the quarter, but performance remained highly concentrated. The five largest contributors to the MSCI World Index were all US technology companies, driven by continued enthusiasm around AI.

There is no doubt that AI is shaping the investment landscape. Spending on chips, data centers, networking and power infrastructure has reached a scale that is influencing economic growth, corporate profits and capital allocation decisions across a wide range of industries.

The challenge for investors is that this has created an increasingly concentrated market. Today, a relatively small number of companies are driving a disproportionately large share of global equity returns

In the short term, diversification can feel frustrating because it means you do not own as much of the market's strongest performers as a concentrated portfolio might. That is the opportunity cost.

But concentration also creates risk. History shows that periods of narrow market leadership do not last forever. If AI-related investment slows, or investors begin to question returns on that spending, leadership can change quite quickly. When that happens, diversification suddenly becomes very valuable.

Our philosophy remains unchanged. We want to build a portfolio with multiple drivers of return, rather than relying on a single theme, sector or factor continuing to work indefinitely. It is a bit like building an aircraft with more than one engine.

You may not always fly the fastest, but you are much more resilient if conditions change. 

How did the strategy perform during the quarter?

The quarter was split into two very different periods. In July, we saw a sharp reversal in AI and semiconductor stocks. Investors became increasingly concerned about valuations, competition, capital intensity and the timing of returns from AI investment.

The Philadelphia Semiconductor Index fell more than 20%, marking its largest monthly decline since 2008. During that environment, the strategy outperformed. However, that reversal proved short-lived.

Technology and AI-related stocks recovered strongly during August and September, which weighed on relative performance. At the same time, investors began pricing in a higher-for-longer interest-rate environment as inflation remained sticky, growth proved resilient and energy prices moved higher.

This created additional pressure on some of the cyclical areas where we are overweight, particularly Industrials. At the stock level, our strongest contributors included Azelis Group, Standard Chartered and Rolls-Royce. Detractors included QXO and Universal Music Group.

One point I would highlight is that today's market can reprice businesses extraordinarily quickly.

Take Amazon as an example. We initiated the position earlier this year when investors were heavily focused on the cost of its AI investment programme. A short time later, AWS growth accelerated significantly, sentiment improved and the shares rallied around 25% within a matter of days. We subsequently exited the position. 

For active managers, that speed of repricing creates both challenges and opportunities. It reinforces the importance of being disciplined, flexible and willing to react when valuations change. 

Where are you finding opportunities today? 

The most interesting opportunities today are often in areas receiving the least attention from investors. 

As capital continues to flow into a relatively small group of AI-related businesses, we are increasingly finding attractive valuations elsewhere in the market.

During the quarter we initiated positions in Visa and Arthur J. Gallagher. Visa is the world's largest payments network and benefits from a powerful combination of scale, network effects and pricing power. Investors have focused on regulation and alternative payment methods, but we believe many of those concerns are overstated.

Meanwhile, the shares are trading close to the lower end of their historical valuation range. Arthur J. Gallagher is a global insurance broker, which in our view is operating a highly recurring, capital-light business model. Investors have become concerned about softer insurance pricing and the potential impact of AI on the industry. Our view is actually the opposite.

Many aspects of insurance broking, such as client relationships, advice and claims advocacy, are difficult to automate, while AI may ultimately improve productivity and margins. More broadly, we are seeing opportunities emerge across a range of sectors and industries outside the market's most crowded trades.

That is one of the benefits of today's environment. When investor attention becomes very narrowly focused, it often leaves high-quality businesses trading at attractive valuations elsewhere. Those are precisely the type of opportunities we are trying to identify.

The key message is simple. The opportunity cost of diversification is currently high. But so is the risk of concentration. Our aim is not to predict exactly when market leadership will change. It is to build a diversified portfolio that can continue to compound returns for clients across a wide range of market environments. 

Our investment philosophy

Within Invesco Global Equity Income Trust (IGET), we believe in bottom-up stock picking. This means we choose investments based on the strength of individual companies not just trends or sectors. We look at how well a business is run, where it makes money, and whether it has the potential to grow.

This approach allows us to personalise and specialise our picks, avoiding overexposure to any one sector and ensuring a well-diversified portfolio. For you, that means a strategy designed to balance risk and reward across different market conditions.

Rather than chasing short-term trends, we focus on a company’s fundamentals – the basics of how a business is really doing, for example, its profits, cash flow, balance sheet strength and long-term growth prospects.

Discover more from Invesco Global Equity Income Trust

Invesco Global Equity Income Trust invests in companies around the world, using a research-led, long-term investment approach to identify attractively valued businesses across a range of sectors and regions. The portfolio is actively managed with the aim of providing income and long-term capital growth while avoiding overreliance on any single market trend.

Learn more about the trust’s investment approach, portfolio and objective