Hopes that 2026 might bring respite after last year’s policy turbulences were rapidly dashed. On January 3, US special forces snatched Venezuela’s president, Nicolas Maduro, from his home. Earlier this week President Trump signalled support for Iranian protesters by threatening – though not yet ordering – 25% tariffs on countries trading with Iran and hinting at possible military action. 

The US administration is attempting to politicise the Fed 

At home, the Department of Justice has opened a criminal probe into Jay Powell, the chair of the Fed, on what are widely viewed as made-up charges, designed to pressure the Fed into easing policy more aggressively and to showcase the White House’s power over other branches of government. For the first time, Powell publicly pushed back, accusing the administration and the President of political interference and intimidation. Former Fed chairs, foreign central bankers and even two Republican Senators have rallied to his defence. In the coming weeks, the Supreme Court may rule on the legality of the ‘reciprocal’ tariffs and on the dismissal of Lisa Cook, another Fed board member. 

Financial markets ignored these developments 

Remarkably, financial markets have taken these developments in stride. The only exception is precious metals, whose prices have climbed further. For the economic outlook, the first couple of weeks of 2026 are a reminder that the administration’s activist instincts – most recently its promise to tackle the ‘affordability crisis’ with price caps – are unlikely to go away. 

Positive outlook for the global economy 

Even so, we maintain our broadly positive outlook set out in our year-ahead note published last November: fiscal policy is shifting from a headwind to a tailwind in most major economies, financial conditions remain loose and the AI build-out continues apace. 

Accordingly, we have made only modest forecast changes. For the United States, we now expect GDP growth of 2.2% in 2025 (up from 2%), 2.3% in 2026 (from 2%) and 2% in 2027 (from 1.7%), reflecting stronger-than-expected momentum in late 2025 and, for 2027, firmer trend productivity growth as AI diffuses through the economy. 

Fed to cut rates once this year to 3.5% 

Under this scenario, and with strict immigration controls in place, the labour market could tighten again, and wages accelerate as demand strengthens. The fall in the unemployment rate to 4.4% in December, despite meagre job creation, suggests the process may already be under way. Should the next few employment reports confirm this, companies – which largely absorbed last year’s tariff costs in their margins – may be more inclined to pass those costs on. In such circumstances, and despite softer energy prices, headline inflation should hover between 2.5% and 3.0% this year. This would signal to the Fed that cutting rates into stimulative territory is unwarranted. Therefore only one further rate cut is expected this year to 3.5%, our estimate of the neutral rate. More dissents on the FOMC, however, could lead to less predictable decisions and greater market volatility. The next Chair is likely to push for easier policy early in his tenure, regardless of the data, but doubts over his credibility may blunt his influence – nudging the Fed towards the ‘one person, one vote’ model used at the Bank of Japan or Bank of England. 

A cyclical recovery in euro area has started 

There are early signs, particularly in the euro area, that the capex upswing is spreading beyond AI-related sectors. And despite recent soft inflation prints, the ECB made clear at its December meeting that it sees little reason to change its stance. The window for an additional rate cut is closing fast, and we stick to our view that policy will remain unchanged through 2026. A cyclical recovery in the euro area, especially in Germany, should in turn lift growth in Switzerland, given close trade ties. Cyclical indicators, such as the KOF barometer and the SECO consumer confidence index have both risen in recent months, also a reflection of stronger credit growth and construction activity. These are not signals that call for additional monetary easing; we maintain our view that the SNB will hold rates steady this year and lift rates once in 2027. 

Bank of Japan will have to tighten policy  

One central bank that has turned more hawkish is the Bank of Japan, confronted with sticky inflation, a weak yen and additional fiscal stimulus. Prime Minister Takaishi, buoyed by strong polling, is set to call a snap election. A larger majority would allow her government to resubmit the budget for the 2026 fiscal year, with higher spending on defence, AI infrastructure and energy security. Additional measures to support households’ purchasing power are likely too. We have revised up our policy rate forecast to 1.50% by year-end (from 1.25%) and to 1.75% by end-2027 (from 1.5%), implying a mildly restrictive stance. 

Early policy easing to support the Chinese economy 

Our China growth forecast for 2026 remains at 4.5%. Towards the end of 2025, investment weakened and consumption slowed on a year-on-year basis as the consumer subsidy program clocked a full year. But the government has already delivered more policy support to revive investment and boost consumption than pledged during December’s Central Economic Work Conference. A new round of consumer subsidies was announced at the end of 2025 with green products being prioritised. On January 15, the People’s Bank of China (PBoC) also announced a 25bp rate cut on relending rates, which are part of the PBoC’s structural monetary policy tools. Consumer sentiment has picked up further and is at the highest level in many months. The contribution from net exports to GDP growth is expected to remain sizable in early 2026. While the economy is not as unbalanced as in the late 2000s, its trade surplus in percent of world GDP has hit its highest level, likely indicating losses for other global competitors. 

EMs remain resilient despite geopolitical tensions 

Emerging market (EM) economies have remained resilient. AI-related demand is expected to continue to boost tech exports from Asia, while rising metals prices should be supportive for commodity exporting EMs. Monetary easing in 2025 for most EMs should support domestic demand in 2026 even as fiscal policy may be a drag in many instances. Although most EMs are at or close to the end of their rate cutting cycles, a few such as Brazil and Turkey still have room to ease. Geopolitical noise has risen with the capture of Maduro in Venezuela and Iran’s uprising, but it has not had a negative impact on EM. 

By Raphael Olszyna-Marzys, international economist at J. Safra Sarasin Sustainable Asset Management 

The UK’s highest rated bank on Trustpilot polled brokers on their experiences during a recent webinar on the subject of Near Prime, following Atom bank’s publication of its inaugural Near Prime Index. 

More than nine in 10 (93%) brokers said they had seen an increase in customers with either adverse credit or who would fail traditional credit scores over the last year. It’s a trend they expect to continue, with around three quarters (74%) predicting a further jump in Near Prime business in 2026.

And they called for improved financial education in order to help the next generation of borrowers avoid succumbing to the same credit mistakes.

The Government recently announced plans to include financial education within the national curriculum, and brokers were polled on what elements they felt were most important for inclusion. An overview of the different forms of credit was the most popular option, pinpointed 22% of respondents, while almost one in five called for lessons on the real cost of borrowing and how debt can build up over time. 

Breaking misconceptions about Near Prime

The webinar was hosted by Paul Hunt, Managing Director of media agency Square 1 Media, and brought together a panel featuring Richard Harrison, Head of Mortgages at Atom bank, Jonny Magill, Chief Commercial Officer of broker Haysto, and Nakita Moss, Head of Lender at Twenty7tec.

The discussion explored the increasing scale of the Near Prime market, with panellists noting that many customers experiencing credit blips are middle- to high-income earners affected by life events or short-term financial pressures.

Data from Atom bank’s Near Prime Index revealed a significant proportion of these borrowers have household incomes of between £75,000 and £150,000, demonstrating that adverse credit is not confined to lower-income households. Panellists also noted that customers often misunderstand the long-term impact of minor credit issues, and better financial education could prevent many from falling into avoidable difficulties.

Technology was identified as a key enabler for brokers managing Near Prime cases. Panellists noted that integrating adverse credit data earlier in the research process leads to more accurate product sourcing, reduces adviser workload and supports clearer customer expectations.

Richard Harrison, Head of Mortgages at Atom bank, said:

“Near Prime is now a mainstream part of the market, with our research highlighting the growing role it plays – and looks set to play – in the daily workloads of brokers across the country. What came through clearly in our webinar is that customers need more support and better financial education to help them understand borrowing, avoid unnecessary credit blips and navigate the mortgage process confidently.

Demand for near-prime lending is only likely to increase, as we see the continued ramifications of the budgeting challenges of recent years, so it’s crucial that lenders provide clear pathways back to Prime products as customers’ circumstances improve. Atom Bank is committed to supporting these borrowers, combining flexibility, speed and criteria designed for the realities of today’s market.”

“It is time to forget central scenarios and think about improbable but possible outcomes”, says Jackson.

Given the bullish market outcomes in 2025, Jackson is looking to a reversal of some trends saying, “I believe the biggest returns are earned (or the biggest losses avoided) by successfully taking out-of-consensus positions.”

A year ago, Invesco’s Global market Strategist pointed to the popular idea of the “Trump trade” with two of his predictions being a weakening US dollar in 2025 and US stocks to underperform global indices. These were among the five successful ideas he predicted. However, he also points out that Bitcoin did not fall below $50,000 – one his other improbable ideas for 2025.

Paul Jackson’s 10 improbable but possible outcomes for 2026:

Aristotle said that “probable impossibilities are to be preferred to improbable possibilities”, meaning that we find it easier to believe in interesting impossibilities (B52s on the moon, say) than in unlikely possibilities. The aim of this document is to seek those unlikely possibilities – out-of-consensus ideas for 2026 that I believe have at least a 30% chance of occurring. The concept was borrowed from former colleague Byron Wien.

• US Democrats win both houses at mid-terms

Republican control of both houses of Congress has enabled President Trump to implement his policy agenda. However, US mid-term elections are due on 3 November 2026 and the party of the president usually loses seats in both houses (see Figure 1). The only occasions when this was not true for the House of Representatives was during the second term of Bill Clinton and the first term of George W. Bush (when both had Gallup job approval ratings above 60%). The House swinging to the Democrats is something of a consensus idea (the Republicans only have 220 seats, versus the 218 needed for a majority). However, the Senate appears more challenging, as the Democrats would need to flip four of the 22 Republican seats that are up for grabs (only 35 of the 100 senators face re-election in 2026). That is a big ask, but with

President Trump’s job approval rating falling, I think a big swing against the Republican, this may lead to big policy initiatives in 2026 (Venezuela, Greenland, 50% boost to defence spending).

• Russell 2000 outperforms the Magnificent 7

Conversations with investors around the world suggest a strong consensus that US mega caps will continue to outperform, driven by the AI phenomenon. Recent history offers support for this view: in the five years to 31 December 2025, the annualised return on Bloomberg’s Magnificent 7 Total Return index was 51.2%, versus “only” 10% on the Russell 2000 index (total return). However, in 2025 the performance gap was reduced to 24.7% (Magnificent 7) versus 12.8% (Russell 2000) and the performance within the former was concentrated in two stocks (the rest had share price gains of less than 15%, with three below 10%). If the US economy accelerates, it could be time (at last) for smaller caps to shine and I think it is possible that the wheels fall off the mega cap bandwagon, especially as doubts arise about the economics of AI investments.

• USD/JPY falls to 140

The list of surprises for 2025 contained a prediction that the US dollar would weaken, which it did, but the decline against the Japanese yen was minimal. The yen is extremely weak in real trade weighted terms (more than 40% below post-1990 norms, based on Goldman Sachs indices). I think it became so because the Bank of Japan (BOJ) refrained from the global tightening of 2022/23, thus creating a wide gap between its interest rates and those of other countries. That is now changing, with the BOJ gradually normalising rates upward as many other central banks ease. In 2026, I expect the BOJ to raise its rates by 50 basis points, while I think the Fed will move in the opposite direction. At some stage, I expect that narrowing of spreads to support the yen and, given the degree of undervaluation, I think it will move rapidly. USD/JPY at 140 may seem a long way from the current 158, but it is not when considering the valuation gap.

• UK 30-year yield ends 2026 below that of the US

30-year government yields appear to have normalised upward from the post-GFC and pandemic lows (see Figure 2). Whether they have now reached long-term norms is hard to know but I suspect they are close (based on notions of long-term nominal GDP growth and appropriate term premia). There have also been some interesting relative moves: Japanese yields have caught up with those of Germany; French yields are now closer to Italian than German yields and US yields are again above those of Italy. Highest of all is the 5.12% seen in the UK (as of 9 January). Despite political instability, I expect the UK 30-year yield to finish 2026 below that of the US. First, UK long rates have often been lower than those of the US and should be so (in my opinion) because long-term nominal GDP growth is likely to be lower in the UK. Second, the US fiscal position appears more precarious than in the UK, especially given the desire to boost the popularity of Republicans ahead of the mid-term elections (see the recently proposed 50% boost to defence spending) and this could raise US long yields.

• Keir Starmer survives the year

To those outside the UK, it may seem odd that we are talking about the demise of Prime Minister Keir Starmer (his Labour Party won 411 out of 650 parliamentary seats in July 2024) and he is playing an important role on the global stage). But to those in the UK, his demise is widely anticipated. His government has upset businesses, farmers, junior doctors, pensioners, the disabled, those wanting a firmer stance against the US and those wanting nothing to do with the EU. His government has been forced into a number of embarrassing U-turns by its own backbenchers and its YouGov net approval rating has collapsed from a post-election peak of -2% to -59% (they are usually negative). That is worse than any rating given to Boris Johnson, and close to the worst suffered by Theresa May and Rishi Sunak (the Liz Truss low was -76%). With the Reform Party of Nigel Farage leading in every opinion poll since May 2025, and Labour recently losing ground to the Green Party, I think it likely that it will suffer in the 7 May local elections. Whether before those elections or after, there may be a growing desire within the Labour party for a leader who can give a better sense of direction. However, a challenger would need the open support of 81 sitting Labour MPs before a leadership contest could be launched (and support will be split across numerous potential candidates). That may prove an insurmountable hurdle.

• Argentine govt. bonds outperform global indices

The three best performing government bond markets in 2025 (among the 35 that we follow, in local currency terms and based on ICE BofA government bond indices), now have USD denominated 10-year yields of 5.9% (Mexico), 6.1% (South Africa) and 6.6% (Turkey). They are interesting but I am not convinced the spread is enough versus a US 10-year yield of 4.17%, so have chosen to go with the 9.8% available on Argentina’s USD denominated 10-year bonds (NY Law). Given the USD denominated nature of these bonds, the risks are focused on default and IMF forecasts suggest the gross debt to GDP ratio will fall to 74% in 2026 (from a recent peak of 155% in 2023). The big opportunity may have gone (the recent peak was 31% in October 2022), but with enthusiasm for Milei’s reforms and support offered by the US, I suspect the returns will be hard to beat.

• EU carbon price goes above €100 per tonne

ESG may no longer be fashionable but I believe climate change is the biggest externality we face and that making the polluter pay is the most efficient way to deal with it. The EU’s Emissions Trading System tries to set appropriate pricing signals by systematically reducing the volume of CO2 emission allowances. The rate of reduction in the allowances cap has been doubled from 2.2% per year in the 2021-23 period to 4.3% from 2024 to 2027, which should support the price of allowances (carbon price). The EU carbon price bottomed at €56 per tonne in February 2024 and recently peaked just below €89 (just short of my 2025 target of €90). An upturn in the EU economy (which I expect) could boost demand for allowances, just as supply falls more rapidly. So, I am doubling down and predicting that the EU carbon price will go above €100 in 2026.

• Kenyan stocks outperform for third year in a row

In my search for exotic stock market opportunities, I usually look for the holy grail of a dividend yield that exceeds the price/earnings ratio. The options are very limited this year, with Botswana and Romania the only markets I can find that meet the above criteria when using historical valuation ratios. However, after a 51% local currency gain in the Nairobi All Share Index (NAS) in 2025, I stick with Kenya. The estimated 2026 NAS P/E is 7.2 and the 2026 dividend yield is 7.4% (as of 9 January 2026, according to Bloomberg consensus estimates). Usually, whenever valuation metrics are at such levels it signifies either that a big opportunity has presented itself or that something is about to go very wrong. Bloomberg consensus estimates suggest that both earnings and dividends are expected to rise in 2026 and 2027. So, no problem there. Also, the usual macro metrics (growth, inflation and economic balances) do not signal big problems, and in 2025 the shilling was broadly stable against the US dollar. The drawback is a market capitalisation of only $21bn.

• Gold falls below $3,500

Everything seems to favour gold at the moment: mounting government debt, rising geopolitical tensions and a weakening dollar. Most of the investors that I meet like gold: understandably given the doubling of its price in less than two years (see Figure 3). But I would expect demand to fall when prices rise so much. Indeed, World Gold Council data shows the following year-on-year declines in the first three quarters of 2025: central bank purchases -13%, jewellery demand -20% and technology demand -1%. The only component of demand to rise was investment (+87%), largely on the back of a reversal of ETF outflows. I am concerned that, at some stage, investors will start to focus on the level rather than the momentum of prices. When that happens, I think the fall could be rapid.

10. England reach the FIFA World Cup final

FIFA’s 2026 World Cup in Canada, Mexico and the US could be one of the more chaotic given US visa requirements, eye-watering ticket prices, the expansion to 48 teams, the lack of attention to player and spectator welfare (too hot!) and the heightened security whenever the US president attends. As for the football, FIFA has rigged matters so that the top 4 ranked teams can’t meet until the semi-finals (if all goes to plan). With the information currently available, I think those four teams will contest the semi-finals. En route, I have England beating Mexico in the round of 16 (in Mexico City) and Brazil in the quarter final. Then for the big surprise: I expect England to beat Argentina in the semi-final, thus reaching the final for the first time since 1966. Unfortunately, I think they will then face #1 ranked Spain, who I think will prevail

Susannah Streeter, Chief Investment Strategist, Wealth Club:

‘’The FTSE 100 looks set to take a breather after reaching fresh records. Futures indicate a flat start to trading as some of the trends pushing the index higher ease off at the end of the week. With the threat of immediate action in Iran having receded, gold prices have fallen back, limiting progress for mining stocks. Energy giants also look set to be on the back foot, with oil prices in retreat, as the threat of disruption of Iran’s oil output recedes.

Wall Street has been on a roll, with the earnings season so far giving plenty of reasons for cheer, and futures indicate a higher open. The AI juggernaut clearly has further to run, with demand for AI chips seemingly insatiable for now. The surge in demand for AI products manufactured by TSMC has pricked up the ears of the US administration. It’s agreed a deal for a reduction in tariffs for Taiwan, if companies like TSMC base more chip factories on US soil. If President Trump sees success or the potential for greater gains, he wants a piece of the action. This is evident in his interventionist foreign policy. Following the action in Caracas, the ousting of Maduro and the seize of control of the country’s oil, the US is already selling Venezuelan crude at 30% higher prices. 

While tensions appear to have calmed to some extent in South America and the Middle East, the focus has shifted North. Geopolitics have turned icy, with the future of Greenland casting a chill over transatlantic relations. Trump’s ambitions to take over the territory have been broadcast loud and clear, but risk destroying the NATO alliance and setting off a fresh trade war. As European troops arrive on the island for exercises and as a show of unity with Denmark, senior politicians have also been attempting to make the US position trickier. France’s Finance Minister Roland Lescure has warned US Treasury secretary Scott Bessent that if the US seizes the semi-autonomous territory, it would endanger Europe’s economic relationship with Washington.

The US says owning Greenland is strategically important and crucial for national security, enabling it to launch operations against adversaries, there are other interests at stake. The island is rich in minerals, particularly rare earths, crucial for the US tech industry, and as ice sheets melt deposits become more accessible. Current indigenous rights limit mining opportunities but under US control it’s likely that such protections would be eroded to enable greater exploitation. The Arctic is set to stay the focus of internation rivalry as climate changes creates new shipping routes, and opportunities for resource extraction.’’

Claire Trott, Head of Advice at St. James’s Place, comments: “With less than two weeks to go until the Self-Assessment deadline, the pressure is on for millions¹ of taxpayers who have yet to file their return. While the tax return process is daunting to many, it’s really important to get started on it as early as possible. Missing the deadline is a costly mistake to make, with HMRC charging £100 to anyone missing the January deadline, and even more as time goes on. 

“It’s also important not to complete your tax return too late as filling it out in a rush could result in important details being overlooked, and, ultimately, leave many paying more tax than necessary. For those pulling together their tax return in the final few days, there are a number of details that can easily be overlooked when filing, but which can add up to significant tax relief. Taking the time to include all relevant information is crucial to ensuring taxpayers receive the full relief they are entitled to.

Claire Trott outlines additional areas to consider when filling in a self-assessment tax return:

• Charitable contributions: “If you’re a higher rate taxpayer, Gift Aid payments can reduce your tax bill – but you’ll need to specify them in your form or inform your accountant of anything that qualifies. A lot more is paid under Gift Aid than people realise – including subscriptions to organizations like Scouts, Guides, the National Trust, Wildlife Trust, and English Heritage, as well as entry fees for museums and zoos. Donations made through platforms like Facebook Giving also qualify. Similarly, if you donate goods to charity shops and sign up to Gift Aid, the charity will send you an annual statement detailing your contributions, allowing you to reclaim the associated Gift Aid in your tax return.

“It’s well worth keeping a record throughout the year of any payments that are eligible for Gift Aid, as it can soon add up. For the tax year to April 2024, as much as £1.57bn of tax relief was given to donors, with around £690m paid in higher rate tax relief².

• Business mileage: “If you travel for business reasons and your employer doesn’t cover the full allowable cost as detailed below, you should claim a mileage allowance on your Self-Assessment return for the difference. If you drive a car or van for work, you can use simplified expenses to claim 45p off your tax bill for every mile travelled up to 10,000 miles. After that, the amount you can claim is reduced to 25p. You need to keep a record of your mileage over the course of the year to claim tax relief on these travel expenses. You can’t claim for travel to and from your work, unless it’s a temporary place of work. 

• Business clothing expenses: “While you’re not allowed to claim the contents of your entire work wardrobe as an allowable expense, there are certain items of clothing you can claim to reduce your Self-Assessment tax bill at the end of each financial year. These include work-related uniforms and protective clothing needed for your work, such as overalls or safety boots, that are not provided by your employer. To qualify, they must be necessary, work-specific clothing items.”

1 – According to 5.65 million still to file as the Self Assessment deadline looms – GOV.UK

2 – According to UK charity tax relief statistics commentary – GOV.UK

GillenMarkets was founded by Rory Gillen and currently advises on over €650m of assets. As part of the acquisition, Rory Gillen, five investment advisors, its head of research, and its support team will join QCE.   

This acquisition expands QCE’s presence in Ireland and continues the evolution of its integrated investment management and financial planning offering for clients in Ireland and throughout Europe. QCE’s office was established in 2003 before becoming authorised as Quilter Cheviot Europe in 2019 to serve clients across the European Union. QCE’s business has grown significantly since 2022, doubling its AUM in the process, and this acquisition represents the next step in that growth. 

Andrew Fahy, Chief Executive of Quilter Cheviot Europe: “We are delighted to announce the completion of our acquisition of GillenMarkets, and that we can welcome our new colleagues and clients to Quilter Cheviot. Rory and the team have grown this business over several years and are hugely respected across the Irish business and wealth management community. We are excited to see what our combined team can achieve. QCE has grown substantially over the past three years, and we want to continue to build on our scale and reach. Our ambition is to be the wealth manager of choice in Ireland, and this exciting acquisition supports us on that journey.”  

Rory Gillen, Founder of GillenMarkets, added: “After more than a decade and a half, this is a huge milestone for the GillenMarkets team, and we are looking forward to being part of Quilter Cheviot. QCE has built an excellent and respected reputation in the Irish market, and we are excited by the opportunity to combine with such a prestigious wealth manager. With similar investment and client-focused philosophies, clients will see a huge benefit from us joining a business with enhanced investment resources and capabilities.”

Gartner, the research and advisory company, estimates global AI-related spending (software, services, infrastructure, hardware) in 2025 to be as high as $1.5 trillion, rising to more than $2tn in 20261, a figure that invites comparisons with past episodes of market optimism.

Yet despite the rising sentiment that the market echoes the late 90’s, the evidence suggests something more durable is taking shape.

Much of the present wave of investment is directed toward tangible, revenue-producing infrastructure such as semiconductors, data centres and software platforms that form the foundation of future productivity.

Governments now treat AI compute as a strategic resource – a sovereign “arms race” – offering tax incentives and regulatory support to secure domestic capacity. The pattern resembles the early investment in railways, electricity and the internet, episodes in which heavy capital expenditure looked excessive until the economic returns arrived afterwards.

Revenue growth, though uneven, is already material and underappreciated. The leading AI developers are generating billions in sales; Cloud providers are seeing double-digit growth in workloads tied to AI; Enterprises are embedding machine learning into daily operations, from code generation to legal drafting and customer service.

At Microsoft and Google, roughly a quarter of new code is already written by AI systems, a share expected to rise sharply this decade. These advances are producing measurable cost savings and efficiency gains, suggesting the current build-out is driven less by hype than by expectation of real productivity improvements.

Monetisation models are also maturing. What began as a wave of free access is evolving into subscription and enterprise-based revenues. Developers such as OpenAI, Anthropic and Meta have introduced paid tiers. Software firms are integrating AI into existing tools and charging accordingly. Estimates of the potential market for automation software run into the trillions, and while such figures are inevitably imprecise, they reflect the breadth of AI’s economic reach.

This is not to say valuations are comfortable.

Parts of the sector, particularly chipmakers and cloud providers, are priced for confirmed, high growth. Energy costs, regulation and geopolitical fragmentation could slow deployment though and some corporate adopters may struggle to translate pilot projects into sustained productivity. Yet these risks look cyclical rather than systemic. Unlike the dot-com era, the assets being built today, such as data infrastructure and compute capacity, retain value even if near-term demand softens, though this is not ARK’s expectation.

The technology itself continues to improve rapidly. Inference costs (the expense of running models) are falling by orders of magnitude each year as engineers refine architectures and compression methods. These advances are expanding the range of profitable applications, not

constraining them. Scale now confers advantage: the largest players enjoy self-reinforcing loops of data, optimisation and efficiency that strengthen their competitive position.

For investors, the challenge is to separate durable exposure from transient fashion. What defines an “AI stock” has become elastic, covering everything from semiconductor firms to peripheral software vendors. Genuine value will accrue unevenly across the value chain. Hardware manufacturers may see early gains, but longer-term rewards are likely to flow to platform and application providers that capture recurring revenues. Passive concentration in a handful of technology mega caps risks overexposure, while opportunities may exist among smaller, more specialised firms applying AI in robotics, logistics or process automation.

The broader point is that technological revolutions often look extravagant in their early stages. The railways, the internet and electrification all inspired warnings of bubbles before transforming productivity. AI appears to be following the same path. The current surge in capital spending may look unsustainable, but it is laying the groundwork for structural change in how economies produce, code and communicate. In this environment, we underscore the need for active management.

Valuations will ebb and flow, alongside investor sentiment. But dismissing the entire sector as a bubble misses the substance of what is being built.

The AI economy is moving from speculation to deployment, from ideation to infrastructure. Investors may yet experience cyclical corrections, but the long-term story, one of rising efficiency and new industrial capability, is unlikely to be a fad.

[1] – https://www.gartner.com/en/newsroom/press-releases/2025-09-17-gartner-says-worldwide-ai-spending-will-total-1-point-5-trillion-in-2025

By Thomas Hartmann-Boyce, ARK Invest’s Global Head of Investment Solutions

Remaining diversified continues to be a valuable approach for investors of all experience levels, and Paul Angell, head of investment research at AJ Bell, has highlighted eight funds and trusts catering to a range of risk appetites that investors may consider this year. 

Cautious investors:

Personal Assets Trust 

“This is a defensively managed multi-asset investment trust where the managers, Sebastian Lyon and Charlotte Yonge, put a high degree of emphasis on capital preservation. The trust is long-only, with concentrated equity holdings and low turnover.

“The managers tend to invest in traditional asset classes (equities, government bonds and gold), and are reactive to market opportunities with their weightings to these core asset classes. Within their equity holding they look for higher quality, cash generative businesses. Despite being invested in major, liquid asset classes, the trust still takes on market risk, and there is therefore no guarantee the trust will protect capital over any period. That said, the trust’s long-term performance has been good, delivering a solid return profile with significantly less volatility than wider markets.

“Personal Assets Trust’s 2025 returns were particularly strong, delivering 10.4% over the year, with the trust’s gold positioning particularly beneficial to returns.

“At the time of writing, the trust remains conservatively positioned, with 44% of assets held in government bonds (US, UK and Japanese), mostly inflation linked, 12% in gold bullion and 41% in equities. The trust is not typically geared, and a discount control mechanism (DCM) is in place. This DCM keeps the trust’s share price trading close to its NAV.

“The trust typically plays a defensive role in portfolios, holding up when riskier assets, such as equities and credit, sell off. This has been the case through numerous market pullbacks including the financial crisis, the outset of the Covid pandemic and the rising interest rate environment of 2022. For those investors who prefer an open-ended fund structure, the Trojan Fund is managed by the same team and with the same philosophy and approach as the Personal Assets Trust.”

TwentyFour Corporate Bond 

“TwentyFour Corporate Bond is a risk aware sterling corporate bond fund, managed by Chris Bowie and the team at TwentyFour Asset Management – a specialist fixed income boutique with a large team of investment professionals specialising across multi-sector bonds, investment grade bonds and asset backed securities. The business has impressive expertise across these core capabilities.

“The managers of this fund target superior risk adjusted returns versus peers, and the fund is therefore often cautiously positioned within its peer group. Whilst the shape of the portfolio in recent years has tended to include an underweight to interest rate risk, offset by an overweight to credit risk, the fund has actually been underweight both interest rate and credit risk more recently, given the managers’ caution around the tight level of credit spreads. 

“Investment grade credit spreads remain tight, so the bulk of the fund’s c.5.5% yield continues to come from the relatively high risk-free rate in the UK. Providing no major pullbacks in credit spreads, the fund should be able to deliver its c.5.5% yield over the coming 12 months, with potential for additional capital returns should interest rate expectations in the UK fall.”

Balanced investors:

Polar Capital Global Insurance

“The return profile of this equity fund is less correlated than most to global equity markets. This is thanks to the revenue profile of the invested businesses being predominantly tied to insurance underwriting premiums/margins which are not typically reliant on prevailing economic conditions and are often tied to regulatory requirements. 

“Alongside the margins made within their insurance books, these insurance companies generate returns through their investment portfolios, which are predominantly invested in short-dated bonds. Should yields rise, the yields on these short-dated bonds would also rise accordingly, further benefitting the return profile of these companies.

“Following a very strong 2024 when the fund returned 26.7%, returns underwhelmed through 2025 at 2.9%, with the weak US dollar proving a headwind to their US domiciled stocks alongside some company level losses attributable to the Q1 Californian wildfires and the negative sentiment arising from this. The insurance industry continues to enjoy structural tailwinds however, thanks to rising risk complexity across society (e.g. cyber risk), which in turn bodes well for future returns, and 2026 could represent a good entry point for the sector given the underperformance of 2025.

“We believe the fund benefits from many of the elements that make for a great specialist fund – a genuine niche in market exposure (non-life insurance businesses), an experienced and specialised team in Nick Martin and Dominic Evans, and the corporate backing of a committed parent in Polar Capital.”

M&G Japan

“The M&G Japan fund benefits from an experienced manager in Carl Vine, whose in-depth research approach permeates the strong analyst team assessing Japanese equities at M&G. Vine and the team have curated a universe of companies that have undergone what they term a ‘360-degree evaluation’, with a focus on company, as well as financial analysis. Some of the key factors the team look to understand are how a company generates profits, the sustainability of revenues, and what might impact returns in the future.

“The fund’s manager considers risk management to be equally as important as stock selection. As such, he looks to mitigate against excessive sector over/underweights, with individual stocks additionally assessed based on their correlation with each other. The resulting portfolio is a concentrated portfolio of 40 to 60 stocks that can be invested across the market capitalisation spectrum. The team aren’t wedded to a particular investment style, though we expect the portfolio to be fairly core with a value tilt.

“2025 was another very good year for the fund, up c.22% versus c.15% for the sector, backing up outperformance in each of the previous four calendar years. 

“Overall, we believe the fund offers investors access to a strong analyst team who view companies from a differentiated perspective, led by an experienced and considered investor in Carl Vine. The balanced approach to portfolio construction should ensure that stock selection is the main driver of returns and limit some of the volatility historically seen when investing in a particular style in Japan. The fund is also keenly priced which helps it stand out further within its peer group.”

Adventurous investors:

Polar Capital Global Technology

“This specialist technology strategy, boasting one of the largest technology research teams in the market, makes a great fund for AI bulls. The team look to unearth the next generation of technology leaders by identifying the technology industry’s core themes and inflection points alongside deep, fundamental and bottom-up stock analysis and selection. The resulting portfolio is typically invested across 60 to 70 names. 

“The fund had a remarkable 2025, up over 40% versus just c.16% for the index/sector. Yet the managers remain positive on the sector’s outlook from here, believing a vast amount of the economy is still to be disrupted by further innovations in AI, particularly software businesses and service level jobs more generally.

“A c.9% weighting to semiconductor chip designer Nvidia is the largest holding in the fund, whilst two more semiconductor chip designers, Broadcom and Advanced Micro Devices, and major chip manufacturer TSMC make up the rest of the fund’s largest holdings. From a valuation perspective the fund’s price/earnings ratio stood at 28 times and 5.7 times for price/sales (as at 30 November 2025).”

Schroder Global Equity Income

“This deep value, global equity fund’s team are thoroughly committed to a disciplined accounting-based investment process where they scour the cheapest 20% of global stocks. The team look to avoid value traps, with every stock idea undergoing independent modelling by a second member of the team before being allocated to.

“2025 was an excellent year for the fund, up 18.5% versus 13.5% and 12.6% for the index and sector respectively, with stock selection across financials (including SocGen and Standard Chartered), consumer discretionary and energy sectors all contributing positively to returns. The fund’s longer-term returns versus both its Global Equity Income sector and an MSCI World Global Value index are also very credible. That said, the fund’s returns can be very different to wider markets given the smaller pool of stocks investable.

“Just 32% of the fund is invested in the US, with large regional overweights to the UK, Japan and Europe. Traditionally more defensive healthcare companies such as GSK and Pfizer sit in the fund’s top 10, alongside Standard Chartered (UK bank), Repsol (Spanish energy business) and Vodafone (communication services). The fund sits on a price/earnings multiple of just 10.1 times and 0.55 times price/sales (as at 31 December 2025).”

Income seekers:

Aegon High Yield

“This global high yield bond fund is paying out a c.8.5% yield, delivered alongside a low level of duration thanks to high yield bonds being typically shorter maturity than their investment grade counterparts. 

“The managers of this fund, Thomas Hanson and Mark Benbow, are entirely index agnostic in their management of the strategy, believing a passive allocation to high yield bonds is nonsensical given indices are weighted to the most indebted businesses. Given this index agnostic approach, Aegon’s global team of credit analysts are crucial to the success of the fund, generating the individual bond ideas that populate the portfolio. 

“It is also actively managed from a top-down perspective, with the co-managers assessing the fundamentals, valuation, technicals and sentiment of the market. The extent to which they have a positive outlook across these factors then determines the fund’s target beta (0.8 to 1.2).

“The co-managers have been on the fund together since November 2019, during which time they have successfully navigated both up and down markets, including the Covid pandemic and rising interest rates, delivering top quartile returns within their peer group. 2025 was no exception with the fund delivering 10.9%, comfortably outstripping the sector’s 7.4%.”

Man Income

“The Man Income fund’s pragmatic and analytical managers Henry Dixon and Jack Barrat invest in undervalued UK companies across the market cap spectrum which are paying a yield at least in line with the market. In order to avoid value traps the managers also look at a firm’s cash flow and assets. 

“The team seek out undervalued and unloved companies, where the UK market continues to present opportunities. Their investment process centres on identifying two types of stocks: those trading below their replacement cost (what it would cost today to replace a company’s assets and operations) that are also cash generative, and those where the market appears to be undervaluing profit streams.

“Over 2025 the fund was up c.28%, comfortably ahead of the c.18.5% delivered by the IA UK Equity Income sector. Banks were a key contributor over the period, led by Lloyds but with strong contributions also coming from Barclays and Standard Chartered. 

“The fund remains cheaper than the market on a price/earnings ratio of around 10 times, with a distribution yield of 4.4%. The financial services sector remains an overweight at c.30% of the fund, with basic materials, consumer discretionary and real estate making up the fund’s other largest sector weights.”

With more than 30 years’ experience across adviser firms and pension providers, Neil brings specialist expertise in the areas of international wealth management, tax, estate and retirement planning, as Standard Life strengthens its private client and retail intermediary team.  

Neil’s role will include providing technical support to adviser firms around wealth management and estate planning strategies covering a broad range of topics and themes. This will be through webinars, consultancy, articles and commentaries. Advisers are currently navigating significant change in wealth and retirement planning with new rules bringing pensions into scope of inheritance tax from April 2027 and reforms to salary sacrifice as announced in the recent Autumn Budget. Standard Life’s most recent IHT webinar attracted nearly 1,000 registrations highlighting the demand for quality technical insight among advisers.

Standard Life also continues to grow its range of tax-efficient solutions for advisers managing their clients’ estate planning needs, recently launching the new Flexible Reversionary Plan (FRP), enhancing its existing trust range, and maintaining a top-three position in the Offshore Bond market.

Commenting on the appointment, Warren Bright, Head of Retail Intermediary and Private Client Distribution at Standard Life, said:

“Neil’s appointment underscores our commitment to supporting advisers as they navigate the ongoing challenges of estate and wealth planning for clients. We’re seeing strong demand for clear guidance and practical insights on the new rules and how best to prepare for the April 2027 changes. With his technical expertise, Neil will be invaluable in helping advisers better understand the impact of the changes as they rethink retirement planning strategies and revise client solutions.”

Neil Jones added:

“I’m excited to join Standard Life at such a pivotal time for the industry. Advisers are facing growing demand to review financial plans ahead of the IHT reform and other regulatory changes. My priority is to provide clear technical guidance through the complexities and offer practical insight that helps advisers deliver the best possible outcomes for their clients in the evolving tax landscape.”

The late-November Budget prolonged uncertainty, as elevated stock levels and record asking-price reductions reinforced a widespread ‘wait-and-see’ approach among sellers, removing any realistic opportunity for a bounce-back ahead of Christmas. However, signs of renewed activity began to emerge towards the end of December, suggesting the market had paused rather than experienced a loss of activity. With the right, stable market conditions, the UK is entering 2026 with grounds for cautious optimism.

Landmark’s data shows that listing volumes across England and Wales were more resilient in the first half of the year, following around 18 months of consistently strong supply through to July 2025. Activity began to slow over the summer and weakened further into Q4, with listings falling 7% year-on-year. However, a post-Christmas uplift in listing volumes could suggest that this slowdown reflects hesitation rather than withdrawal.

The subdued volumes in Q4 were reflected across the transaction pipeline. Sold Subject to Contract (SSTC) volumes were down 17% across the quarter, compared with the same period in 2024. November alone was the weakest month of the year, with SSTC volumes 25% lower year-on-year, coinciding with peak uncertainty ahead of the Autumn Budget.

Similarly, Landmark’s data shows that mortgage valuation activity was also suppressed in Q4 compared to the first three quarters of the year. The final three months were down 0.2% compared to the same period in 2024, whereas the first three quarters of the year saw activity 12.2% higher year on year.

Meanwhile, property search order volumes, which were broadly in line with 2024 levels ahead of the Budget, weakened through November and December. As a result, Q4 search activity finished 19% lower than in Q4 2024.

This trend carried through to completed sales, with completion volumes in Q4 – which typically tends to see higher volumes as buyers and sellers rush to move before Christmas – also reflected the loss of momentum seen through the second half of the year with volumes down 6% compared with the same period in 2024.

In contrast, Scotland’s market showed greater resilience towards the end of the year. While listings dipped slightly in October and November, December outperformed the same month in 2024 as pent-up demand began to feed through. Sold Subject to Missives (SSTM) volumes picked up in December, and with the Scottish Budget falling in January, Scotland avoided the sharper pause seen in England and Wales, entering 2026 with early signs of a stable market.

The pent-up demand building across the market means we enter 2026 with grounds for cautious optimism about the market’s trajectory, should conditions remain conducive and stable. However, improving confidence and driving reform remain critical.

Simon Brown, CEO, Landmark Information Group, said:“By the end of 2025, it was clear that the market had entered a holding pattern. Uncertainty and speculation surrounding the Autumn Budget led many buyers and sellers to pause decisions and delay moving plans.

“Record asking-price reductions, easing mortgage rates and signs of renewed activity towards the end of December all point towards the potential for pent-up demand to progress into 2026; offering cause for cautious optimism.

“As we look ahead, restoring confidence will be critical. Alongside stable economic conditions, improving the speed and certainty of the transaction process must remain a priority if we are to convert that underlying appetite to move into sustainable market momentum and unlock the wider economic value of home buying and selling.”

Elizabeth Jarvis, Divisional Director of Legal and Search, Landmark Information Group, commented on property search activity:“The slowdown in property search activity through November and December reflects how the transaction pipeline remains vulnerable to external shocks, with the usual seasonal downturn coming earlier in 2025.

“Buyers may have been holding off on committing to a move due to the Autumn Budget speculation, which is reflected in the lower volumes of search order volumes seen across the quarter. Looking ahead to 2026, renewed confidence, easing borrowing costs and progress towards a more efficient transaction process will be key to unlocking pent-up demand and driving the uplift in transactions that the sector needs.”

Rob Gurney, Managing Director of Ochresoft, Landmark Information Group, commented on what the trends mean for conveyancers:“Looking at the relationship between completions and new instructions helps explain how the Q4 slowdown played out for conveyancers. The widening gap between the two through October, November and into December was driven by a decline in new instructions as external economic and policy factors led clients to pause before committing to new cases.

“While there was a seasonal uplift in completions ahead of Christmas, the lack of new cases entering the pipeline was the dominant factor for conveyancers, highlighting how hesitation earlier in the quarter could have led to lower numbers of new instructions.”

Ben Robinson, Managing Director of Landmark Estate Agency Services, Landmark Information Group, commented on estate agency trends: “The data shows that 2025 was a tale of two halves for property listings. After a sustained period of strong supply, the fall in listings from the end of the summer could indicate sellers taking a ‘wait-and-see’ approach as Budget uncertainty intensified, particularly through October and November.

“With asking-price reductions widespread, and ample housing stock available there is underlying intent. As market conditions stabilise, this points to delayed activity that could re-enter the market quickly, provided confidence improves and market conditions are favourable.”

Mike Holden, Divisional Director of Growth, Landmark Information Group, commented on mortgage and lending activity: “Mortgage valuation volumes flattened in Q4, down 0.2% compared to the same period in 2024, which reflects how Budget uncertainty dampened purchase-led demand in the final months of 2025. This is particularly stark given that the first three quarters of the year saw mortgage valuation activity that was 12.2% higher year-on-year.

“However, the resilience of remortgaging activity, supported by increasingly competitive rates, highlights that borrowers remain highly engaged. As we move into 2026, the combination of easing rates and improved confidence could assist in creating a more buoyant market.”

Richard Hepburn, Director of Scotland, Landmark Information Group, commented on trends in Scotland: “Towards the end of the year, Scotland’s market showed greater confidence and stability, particularly as activity across England and Wales slowed in the run-up to the Westminster Budget. While Scotland also faced its own Budget, this did not create the same level of uncertainty, allowing buyers and sellers to move forward with greater confidence – something that was clearly evident in December.

“This contrast underlines the importance of clarity and certainty, both in policy and throughout the transaction process, in maintaining momentum even in more challenging conditions. Scotland is well placed to benefit if confidence continues to strengthen.”

Key findings from the report

• In England and Wales, listing volumes across Q4 ‘25 were 7% lower than in Q4 ‘24.
• In England and Wales, sold subject to contract (SSTC) volumes in Q4 ‘25 were 17% lower than in Q4 ‘24.
• In England and Wales, search order volumes in Q4 ‘25 were 19% lower than in Q4 ‘24.
• In England and Wales, completion volumes in Q4 ‘25 were 6% lower than in Q4 ‘24.