University of Kwazulu-Natal

Market Outlook 2026 Investment Trends And Risks To Consider

Bonisiwe Shabane
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market outlook 2026 investment trends and risks to consider

AFTER AN EXTRAORDINARY AND SURPRISING YEAR that saw the S&P 500 record double-digit gains and corporate profits outpace expectations, what comes next? Do equity markets have more room for growth? Are stock valuations too high? What, if anything, could derail economic growth and the market’s resilience? “From energy grids and data centers to defense systems and digital platforms, power is driving the global economy — and shaping the outlook for 2026.” Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank, believes the U.S.

economy and financial markets are powering up for a new level of potential growth. “From energy grids and data centers to defense systems and digital platforms, power is driving the global economy — and shaping the outlook for 2026,” he says. Below, find answers from the Chief Investment Office (CIO) and BofA Global Research to four top-of-mind questions about the potential risks and opportunities ahead. Plus, test your knowledge of current market dynamics. For additional useful insights and lively conversation, watch the Outlook 2026 webcast “Powering up: What could drive the next era of growth?” “The U.S.

economy is firing on all cylinders,” says Joe Quinlan, head of Market Strategy for the CIO, who cites six reasons equity prices could potentially keep advancing: Reading through dozens of 100-page investment outlooks to identify common themes for the year ahead is a daunting task. Fortunately, there are some great tools available to summarize research reports sift through all the different points of view. Below are four major themes common in most of the 2026 investment outlooks. After reviewing 18 reports, four themes emerged again and again in the 2026 outlooks. Several firms referred to what is happening in AI as an infrastructure revolution.

Fears of another tech bubble are understandable, but the current AI boom is fundamentally different from the dot-com era. Analysis from Barclays and Morgan Stanley point to the fact that today’s leaders are highly profitable, cash-generative companies, unlike their speculative, often profitless, counterparts from the dot-com bubble. Hyperscaler capital expenditures are expected to continue, with increased investment in sourcing energy to meet growing demand. The data centers required to train and run advanced AI models are incredibly power-intensive. Goldman forecasts indicate that power demand from data centers is set to grow by more than 175% by 2030 compared to 2023 levels, creating a massive, long-term investment theme in energy and utilities infrastructure. Fidelity semiconductor analyst Jonathan Tseng addressed the doubters nervous about ROI on the huge infrastructure spend:

“So far, AI models continue to improve and productisation is proceeding rapidly. If that works, then everything else will work. Trying to claim that you conclusively know that AI doesn’t deliver value based on old data and old models is like looking at the Wright Flyer and deciding that mass air travel will never... Unfortunately, the page you requested is temporarily unavailable. Please try again later or call 1-800-522-7297 between the hours of 8:30AM – 7:00PM EST Akamai Reference Number: 18.a4d02e17.1764689813.af8cd9e9

At Morgan Stanley, we lead with exceptional ideas. Across all our businesses, we offer keen insight on today's most critical issues. Learn from our industry leaders about how to manage your wealth and help meet your personal financial goals. At Morgan Stanley, we lead with exceptional ideas. Across all our businesses, we offer keen insight on today's most critical issues. From volatility and geopolitics to economic trends and investment outlooks, stay informed on the key developments shaping today's markets.

At Morgan Stanley, we lead with exceptional ideas. Across all our businesses, we offer keen insight on today's most critical issues. This article is part of our Investment Outlook 2026: Seeking Catalysts Amid Complexity The global economic and geopolitical environment is adopting a more multipolar structure, in our view, resulting in greater fragmentation and a broader array of opportunities for equity investors. The US stock market continues to be driven by advancements in and investor sentiment towards AI, with leading companies harnessing technology and scale to achieve remarkable growth. In Europe, a renewed focus on national and economic security is resulting in increased investment in infrastructure and defense capabilities.

Political developments across markets, including in France and Japan, add to a complex backdrop. We believe maximizing equity diversification and managing risk effectively is essential given the investment backdrop. In our view, this can be achieved through active exposure, a global presence, and regional expertise; combined with a strategic blend of fundamental and quantitative equity strategies. The biggest 10 US stocks (8 of which are technology-related) account for nearly 25% of the global equity market, and are worth almost $25 trillion.1 The top 10 companies in the S&P 500 now...

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