Standard Chartered flags strong 2026 returns amid an AI boom

…urges diversification in its 2026 Global Market Outlook

Standard Chartered Bank expects global financial markets to deliver strong returns in 2026, led by equities and other risky assets as artificial intelligence-driven earnings growth, easing monetary policy and lower trade tensions support investor appetite.

However, the bank warned that gains are likely to be uneven, reinforcing the need for diversification, particularly for emerging market investors.

In its 2026 Global Market Outlook, the lender said major asset classes are likely to continue rising, but with wider dispersion than in recent years. That environment, it noted, increases sensitivity to shocks and makes concentrated portfolios more vulnerable to sudden swings.

“Optimists argue equities remain in a bull market supported by strong AI-driven earnings growth, high credit quality and growth-supportive policies,” the report said. “Pessimists argue markets are in a bubble from a valuation standpoint, while still-hot inflation will constrain policymakers and debt challenges will result in bond yields moving higher.”

Standard Chartered said equities should remain the main driver of returns in 2026, supported by continued momentum in artificial intelligence adoption. Earnings growth linked to AI is expected to help justify elevated valuations, though the debate over whether markets are overpriced is likely to persist, especially in the US technology sector. That tension, the bank said, could result in bouts of volatility if expectations are not decisively exceeded.

Despite those risks, the bank sees continued support for equities from three main factors: the persistence of the AI theme, expected US Federal Reserve rate cuts and a weaker US dollar, which has historically been consistent with positive returns for risk assets. The challenge for investors, it said, is staying exposed to a powerful theme while managing the downside risks that come with stretched valuations.

To address that balance, Standard Chartered recommends reducing concentration in US technology through regional and sector diversification. While it remains overweight US equities due to strong technology earnings, it balances this with an overweight position in Asia excluding Japan. The region offers exposure to AI spillovers, domestic policy stimulus in countries such as China and India, and equity valuations that are generally lower than those in the US.

Within Asia, Indian equities have been added as a tactical opportunity, supported by policy reforms, front-loaded fiscal and monetary stimulus and progress on a potential US–India trade deal. Chinese equities, particularly offshore listings, are also expected to benefit from targeted stimulus and AI-related earnings growth.

Beyond equities, the bank sees emerging market bonds as an attractive income opportunity in 2026. It expects both US dollar- and local currency-denominated EM bonds to outperform developed market debt, citing improving fiscal fundamentals, higher yields and diversification away from a Fed-centric outlook. Local currency bonds, it added, offer exposure to rate-cut cycles in several emerging markets.

Standard Chartered is also overweight in its gold position, expecting the metal to extend gains as central banks and investors continue to diversify away from the US dollar. While gold prices are at record highs in real terms, the bank said demand drivers remain supportive, particularly as its inverse relationship with bond yields begins to reassert itself.

Currency diversification is another theme for 2026, with the Japanese yen and Chinese yuan highlighted as potential hedges if risk assets come under pressure. The bank warned, however, that disappointment around AI earnings, a systemic credit event, a reversal in US rate-cut expectations or an unexpectedly hawkish Bank of Japan could all disrupt markets.

Overall, the bank said the outlook calls for resilience rather than complacency, arguing that well-balanced portfolios should be anchored by quality bonds alongside selective equity exposure to innovation. It also highlighted the role of alternative assets as part of a more resilient investment strategy.

The post Standard Chartered flags strong 2026 returns amid an AI boom appeared first on The Business & Financial Times.

Read Full Story