Something appears to be awakening now in Europe. At the heart of it is the prospect of better economic growth, which comes from a number of sources.
For bond investors, a weaker US dollar means very different things depending on the currency you are investing from.
Equal-weighted strategies offer a simple way of diversifying equity exposure in the face of growing concentration risk.
Where do our experts see opportunities and risks in 2026? That was the focus of our Annual Investment Outlook webinar, which brought together experts from equities, fixed income, real estate, alternatives, and more. Read below for some of the key takeaways from the event, and watch the replay for the full conversation.
Excerpts below have been edited for length and clarity.
Brian Levitt, Chief Global Market Strategist and Head of Strategy & Insights, and Paul Jackson, Global Market Strategist, EMEA
Economic resiliency. The economy was remarkably resilient in 2025, and we expect that resilience to continue in 2026. US consumers are in good shape, we expect the Federal Reserve to lower interest rates, we've seen some policy support in Europe and China, and we have a better nominal growth backdrop in Japan than we've seen in quite some time.
The case for rebalancing. The AI story has pushed the US market to pretty high valuations. We expect to see rebalancing to other parts of the world and other parts of the US stock market. For example, China appears to still offer good value. European markets are in line with historical norms. And there is excitement about the backdrop in Japan.
Europe on the mend. Something appears to be awakening now in Europe. At the heart of it is the prospect of better economic growth, which comes from a number of sources:
Hemant Baijal, Head of Macro Alpha and Co-Head of Emerging Markets Debt for Invesco Fixed Income.
A weaker US dollar. Structural and cyclical factors should probably lead to the dollar being weaker over the ensuing quarters. For bond investors, this means very different things depending on the currency you are investing from.
Emerging market debt. If we break down emerging market debt into three components, interest rates, foreign exchange, and, and credit spreads, we still see a lot of value in interest rates, and we see value in foreign exchange. We think the credit spreads are largely fully valued at this time.
Risks in the bond market. There is an imbalance between demand for and supply of long-term debt that we are likely to see over the next few years in Europe, the US, and other developed markets like Japan. That imbalance does not exist in emerging markets, which is one of the reasons why we prefer emerging market rates.
Siddharth Shah, Product Director, Global Equities team
Navigating AI investment opportunities. Valuations are a very important part of how our team determines whether or not we should invest in a stock. There are definitely parts of the market which are trading on hype or hope, but there are other companies that are generating tons of free cash flow. They're not relying on debt to fund this capex. And so really, the big question is what's the return on investment that they're going to achieve? And is it going to be sufficient to justify the current valuations? Crucially, we're looking for businesses within the AI space that have some diversification as well — other sources of revenue and income.
Opportunities in Europe. Europe looks relatively attractive, more than it has in a long time. There's increased fiscal spending coming from Germany and increased defence expenditure. And crucially, there are other sectors where you can find amazing businesses that are growing, providing a dividend yield, and trading at pretty attractive valuations.
Generating income through equities. We take quite a unique approach relative to a lot of our peers. We try very hard to balance income and capital growth. When we're looking for stocks or businesses, we don't have strict criteria of only investing in a company if it generates a certain dividend yield, which a lot of people do. The reason is you then tend to be concentrated in the same types of stocks and sectors, which can lead to outperformance in certain environments and underperformance in others. What we wanted to do is provide our clients with something a bit more sustainable, a bit more stable, through different market environments.
Christopher Miller, Head of Equity Product Management, EMEA ETFs
Growing concentration risks. Whether AI is in a bubble or not, there has been an increasing concentration in equity markets. In the S&P 500, if you look at the weight of the top 10 out of those 500, it's now north of 40%. During the tech bubble it was around about 25% weight in the top 10 stocks. So there's clearly a skewing of markets. And that's going to have an impact on performance.
Equal-weighted approaches. We've seen an increase in interest in things like equal-weighted strategies, for example. Why? Because it gives a nice, simple way of diversifying your exposure. You’re spreading that risk, diversifying nicely. You’re also instilling a rebalancing discipline.
Generating income through equities. We have strategies such as high dividend, low volatility, which I believe is a great way of getting meaningful dividends and income, but reducing the downside risk and volatility. In other areas, US energy infrastructure is a slightly niche part of the investing world that gives a very good yield. Master limited partnerships are a tax efficient structure, fairly unique to the US, that's designed to deliver a pass through of profits to the end investor.
Mike Bessell, Managing Director and Investment Strategist for Europe, Invesco Real Estate.
Reasons to invest. There are five key reasons why investors should consider allocating to commercial real estate: Diversification, competitive returns, market representation, inflation hedging, and reliable cash flow.
Asset-specific opportunities. In real estate, the last decade was very heavily driven by sector trends and sector plays. But given what we're seeing in the world on interest rates, we're pretty clear in our view that real estate returns need to be driven by income and income growth, and that we can't rely on cap rate or yield compression at the market level. So in turn, that means that the returns and the opportunities we look for have got to be much more asset-specific.
A tale of two markets. We often talk about the real estate market, but there are really two markets. The first is the market to occupy our space and to pay us rents. And then there are capital markets, which is how those income streams are priced as an as an investment class. Both of these can be impacted slightly differently by the macro economy.
Georgina Taylor, Head of Client Investment Solutions, EMEA, and Paul Syms, EMEA ETF Head of Fixed Income & Commodities Product Management.
Private markets. There are so many different ways of bringing diversification in. There's a huge amount of concentration risk, for example, in equity markets. Private markets are great for that, because you've got more companies coming to that private space than you do necessarily in that listed space that we're used to.
Gold. There’s been a very strong performance from gold and other other precious metals so far this year. There's been a lot of central bank buying over the last couple of years overall. So that's driven the price when supply is relatively limited. I can see the price staying here, and I don't see that demand from central banks necessarily going away anytime soon. But from an investment standpoint, gold still can play a very important role in portfolios without just a speculation on further price gains. It's been a diversifier. Overall, it has tended to have low correlations with both equities and bonds. And it can also act as the inflation hedge.
Cryptocurrencies. We're now seeing a lot more enquiries about cryptocurrencies, in particular Bitcoin. You're looking at something with, certainly in Bitcoin's case, limited supply. And a diversifying aspect. If you look at it in terms of correlations with other asset classes, very relatively low correlations, negative correlations with treasuries, low correlations with equities. And what we're also seeing is as it becomes more established, volatility is declining. So it's sort of becoming a little bit more of an established asset class. It might not have the same history as gold. But you can definitely see how that could be brought into a multi asset portfolios, a diversifying asset class for many of the same reasons.
Explore detailed insights from our experts on equities, fixed income, real estate, and alternatives. Discover where we see opportunities and risks in the year ahead.
Welcome to our Tactical Asset Allocation hub. Here you’ll find a selection of the most recent research from Invesco Solutions. Read our latest analysis that covers market strategy and opportunities across various asset classes.
In our monthly market roundup for November, Invesco experts review a mixed month for global equity markets, alongside key updates in fixed income.
We see an overall constructive market backdrop with easing inflation and softer growth in the medium term, amid policy shifts and global uncertainties.
