Given the tsunami of turbulence in 2025, investors might have hoped for calmer waters ahead. But with macro and geopolitical storm clouds brewing, 2026 promises more uncertainty and more volatility. So what are the key challenges and critical issues for asset owners in 2026?
We spoke to senior leaders at asset owners and investment intermediaries around the world to gauge their expectations for the year ahead.
AI: Bubbling concerns
Rollercoaster equity markets
In 2025 equity markets were at the mercy of seesawing sentiment towards tech and AI, giving investors a rollercoaster ride. For much of the year, US equities, powered by the Magnificent Seven stocks, outperformed and pushed markets to new highs. But towards the end of 2025, fears around overstretched valuations and an AI bubble sent indices plunging.
Unanswered questions
Looking to 2026, the prospect of an AI bubble is uppermost in investors’ minds.
“The number one challenge for the year ahead is definitely an AI bubble,” says the director of a UK wealth management firm. “Everyone is concerned about AI valuations in US markets. The concern is that markets will run ahead of themselves, AI profits won’t materialise and valuations will fall back sharply in 2026.”
A portfolio manager at an APAC sovereign wealth fund says there are many unanswered questions surrounding AI.
“We’re seeing a lot of investment in AI, but estimates of AI productivity growth vary widely. So the question is, have the markets gone too far? And if so, when will there be a pullback, because the nature of bubbles suggests this can get much more irrational for much longer.”
The chief investment officer (CIO) of a UK public pension fund says investors should focus less on AI equity bubble fears and more on risks to the wider financial system.
“The key question is how AI will impact not just equity markets but the whole circle of finance because risks are showing up everywhere including the bond market and private credit market.”
He adds: “Away from the equity bubble risk, AI will have a real life impact on sectors, industries and companies. And we are trying to disentangle what this will mean for our core portfolio beyond just the Magnificent Seven.”
Productivity push
The managing director (MD) of a US investment management firm sees more opportunities than risks. He says the efficiency and productivity tailwinds unleashed by AI will improve the country’s fiscal sustainability.
“I think we’ll see more AI solutions that will enhance productivity and that’s a key piece of the puzzle for the US to reduce its fiscal deficit. Semiconductor chips and AI data centres are areas where the US should be the leader and where capex should be directed. The resulting efficiency improvements will directly contribute to GDP growth and deficit reduction.”
The MD thinks the rollout of new AI applications in 2026 will boost bond markets as well as equity markets.
“These hyperscale AI companies are on a borrowing spree across both corporate debt and different forms of private debt so they are very important for the sustainability of credit markets.”
Macro menaces
Tariff turbulence
2025 will be remembered as a year when volatility returned with a vengeance. But this was not solely due to fears of an AI bubble. Much of the volatility emanated from US tariffs, which triggered disruption throughout global supply chains.
We conducted some widely-reported research revealing nearly eight in 10 global institutional investors were rebalancing portfolios amid tariff turbulence.
Trade tensions and tariffs will remain a key source of instability in 2026, according to a portfolio manager at a German bank.
“The tariff issue is creating so much uncertainty because it feels like you don’t know what might happen the next day and that’s a problem for investors.”
US economy
The outlook for the US economy in 2026 is a core concern for investors of all stripes.
“The top challenge for me is the US economy,” says the MD of the US investment manager. “I’ll be paying close attention to the path of inflation and Fed rate decisions in 2026 as both are very important for any type of risk asset.”
The CIO of a Hong Kong insurance company agrees all eyes will be on the US in 2026.
“For us in Hong Kong, the US is most important given we have a currency peg. And as always, if the US sneezes the whole world gets sick. So if the US is not doing well, it will impact emerging markets in Asia and particularly China.”
Political headwinds
The political climate in the US is top of mind for the portfolio manager at the APAC sovereign wealth fund. He points to ongoing uncertainties in the wake of President Trump’s attacks on the Federal Reserve and the Democrats winning the New York mayoral race.
In particular, he thinks a sustained attack on central bank independence could have grave implications for Treasuries and the US dollar, the world’s reserve currency.
“If there is a drop in confidence in the US government then certain assets would be at risk and we could see a flight of capital to the euro and yen, and in the bond space to European government bonds and Asian government bonds.”
‘Bright’ outlook for APAC
China’s economy showed mixed signals in 2025, with activity cooling towards the end of the year. While key structural challenges remain, particularly in terms of consumption growth and the property sector, investors in the region have an optimistic outlook.
“China is engineering something of a turnaround at long last and its equity market is healthy,” says the portfolio manager at the APAC sovereign wealth fund. “Furthermore, the real estate market seems to be mostly past the worst.”
He is also upbeat on the prospects for the wider region.
“There are lots of tailwinds in Asia and I believe it’s going to be a very exciting place for the next five to ten years. We are seeing more Canadian investors pour money into the region as part of the need to diversify away from the US, for example.”
The portfolio manager adds that Asian central banks have been ahead of the curve in controlling inflation. And he points to healthy demographics in countries such as India and Indonesia as “painting a very bright economic picture”.
Debt worries
Fiscal (un)sustainability
Away from the whipsawing equity markets, debt markets were also volatile in 2025. Government bond markets were much in focus. Fears over rising public debt and fiscal deficits saw long-term government bond yields move higher in many advanced economies. In the UK, it was a year when sovereign debt became more sensitive to political risk, with bond vigilantes protesting against fiscal sustainability concerns.
“The sheer fiscal ill-discipline in the UK and US and what that means for inflation and interest rates going forward is a real concern,” says the CIO of the UK public pension fund. “If it means rates are going to stay higher for longer because of government deficits then that’s a big issue for pension funds.”
The director of the UK wealth manager says concerns over how governments balance the books will be a major theme in 2026.
“There are big questions in the developed world about governments living beyond their means and you can see that with the UK Budget.”
Credit uncertainty: Late-cycle behaviours?
Stresses in the fixed income space in 2025 weren’t confined to sovereign debt. In the US, questions were recently raised about the health of credit markets after some high profile defaults.
“I’m really concerned because we are seeing early signs of what we would call – using a baseball term – the 19th innings of a credit cycle, where a lot of companies are going bust,” says the MD of the US investment manager. “This all ties back to the loosening of underwriting standards over the last two or three years and some of that is now unravelling.”
These concerns are echoed by the portfolio manager at the APAC sovereign wealth fund who ponders whether recent bankruptcies in the US are a prelude to a “dangerous credit cycle”.
The UK public pension fund CIO thinks parts of the private credit market look vulnerable. “When things expand so rapidly, quality takes a backseat and you’re seeing that now in some asset-backed securities. We haven’t had a recession yet to properly test the structure of private credit. So time will tell, but one has to be really careful because there’s huge concentration risk in these structures.”
Geopolitical jitters
Elevated risk
The world is facing its most violent period in decades. While wars in Ukraine and Gaza dominated headlines in 2025, the year saw multiple conflicts rage across the world. According to a report from The Institute for Economics & Peace, there were 59 active state-based conflicts in 2025 – the highest number since the end of World War II.
The director of the UK wealth manager says geopolitical risk is “particularly elevated” and is bracing for a flashpoint in the coming year.
“I think there’s a good chance that, as we saw in 2022 with the Russian invasion of Ukraine, a geopolitical spillover could have a significant market impact in 2026. As the Ukraine conflict drags on, China and America are still sparring over trade. And then there’s the ongoing Russian relationship with Europe at a time when Europe looks fragmented and weak politically.”
The CIO of the UK public pension fund points to geopolitics as the biggest risk for his organisation.
“Geopolitical fragmentation in the broader context of supply chains and the economic ecosystem remain our main concern going into 2026 because it’s just so random and so disruptive.”
ESG strategies
Polarisation and politicisation
The increasingly polarised and politicised nature of the ESG landscape is reflected in global studies we’ve conducted for clients.
The 2025 Capital Group ESG Global Study shows ESG adoption rates in EMEA and APAC remain very high, while in North America adoption levels are at the lowest level since 2021.
Robeco’s climate investment survey highlights how investors are adapting to these new realities by tapping into opportunities outside the US in areas including renewables.
The portfolio manager at the German bank expects appetite for ESG to stay steady.
“The ESG sector in Europe is now an established part of investing which most clients say is nice to have and I don’t see that changing.”
But a Swiss-based investment consultant says politics and regulations create uncertainties for ESG.
“There are opposing political views around ESG which gives rise to doubt and on top of that there are new regulations coming in Europe with the revised SFDR (Sustainable Finance Disclosure Regulation). I think demand for ESG in 2026 will depend on the political mood music.”
Appetite in APAC
The CIO of the Hong Kong insurer points to China’s role as a leading light in renewables as one reason why demand for ESG in APAC will remain robust.
“I think the journey towards net zero will continue in Asia. There is real commitment, especially in China which is putting lots of money into renewable infrastructure and in this respect is far ahead of any other country.”
However, the portfolio manager at the APAC sovereign wealth fund thinks the AI revolution could relegate ESG to a “second order consideration” in the region.
“In Asia Pacific right now it’s all about deploying AI and all about the energy fuelling the AI boom. AI is the most critical global battleground right now and I can’t imagine ESG having a higher priority than that.”
Cost constraints
The Swiss-based investment consultant highlights ESG cost constraints for asset managers.
“The cost for asset managers doing ESG is high in terms of having the right people and jumping through the right hoops for different regulations and addressing queries from asset owners. So I think from an operational and profit perspective, finding the right balance on ESG will be a key theme in 2026.”
Active management
Volatility buffer
The ongoing geopolitical and macro uncertainty in 2025 unleashed successive waves of market turbulence. This volatile backdrop increased the appeal of active managers as investors sought downside protection, diversification and tactical asset allocation opportunities.
“I really think active management shines during periods of heightened volatility and lack of rational pricing,” says the MD of the US investment manager. “The ability to decipher and understand the ramifications of macro developments and act on information, rather than noise, is why active management is more relevant now and will continue to be more relevant in 2026.”
The ability of active strategies to enhance portfolio resilience during periods of uncertainty was a central theme explored in the Schroders Global Investor Insights Survey, conducted by CoreData.
Private markets tailwind
A further tailwind for active management will come from the growth of private markets, according to the MD of the US investment manager.
“The industry is heading more to private markets and that’s where active strategies really outshine passive because it’s very difficult to replicate these strategies using public equivalents,” he says. “We’ve seen some private credit ETFs but they haven’t been able to exactly mimic the performance or deliver the returns. All in all, I think active managers will come to the fore next year.”
Final thoughts
Vigilance will be one of the key watchwords of 2026 as investors brace for more macro and geopolitical headwinds. A recurring theme among the leaders we interviewed is the need for both resilience to navigate volatility and agility to adapt and respond to a fast-changing environment.
The year 2026 will present new risks, new opportunities and new uncertainties. And investors will need to respond to these challenges with foresight, flexibility and fresh thinking.
Will Roberts is editorial director at CoreData Group, a global specialist financial services research and strategy consultancy. To find out more about our research programmes you can reach him at [email protected]