Helen Jewell is International CIO, Fundamental Equities, at BlackRock<\/p>\n
For equity investors seeking a smooth ride in 2026, \u200bincreasing exposure beyond artificial intelligence euphoria could be a good New Year\u2019s resolution – and opportunities \u200dmay be hiding in plain sight.<\/p>\n
Investors have reason to be wary. U.S. equity valuations currently look stretched, with the Shiller price-earnings ratio for the S&P 500 above 40 \u2013 very close to levels seen during the 1990s dot-com bubble.<\/p>\n
And markets have become highly concentrated. The five biggest U.S. technology companies – Nvidia, Apple , Alphabet, Microsoft and Amazon – now have a collective value \u200dthat exceeds \u200bthe Euro STOXX 50, as well as the stock markets of Britain, India, Japan and Canada, according to analysis from Goldman Sachs.<\/p>\n
Doubts have thus begun to creep in about this year\u2019s AI-fueled rally, with volatility, as measured by the CBOE Volatility Index spiking over the past few months.<\/p>\n
Yet plenty of regions and sectors outside of U.S. tech generated steady returns in 2025 – and we think many are capable of doing so once again next year.<\/p>\n
Regionally, the equity story of 2025 was not the U.S.<\/p>\n
The world\u2019s biggest market was all the way down in 20th place for \u2060year-to-date performance by country at the start of December, based on local-currency returns. South Korea and Spain led the pack.<\/p>\n
And one certainly didn\u2019t need to stay in the U.S. to get double-digit returns. According to Goldman Sachs, 84 per cent of all country stock markets are up more than 10 per cent in the past 12 months.<\/p>\n
There are many reasons why international equities could continue to outperform next year. <\/p>\n
European stocks may benefit from a pickup in economic activity. Loan growth is already rising, and the region\u2019s composite purchasing managers\u2019 index (PMI) is well above 50, signaling economic expansion. This cyclical expansion could be turbocharged \u200cin 2026 by German fiscal stimulus and broader European \u200ddefence spending.<\/p>\n
All this should support cyclical European companies, such as makers of trucks and mining equipment, particularly if the euro\/dollar exchange rate stabilizes next year. <\/p>\n
In Japan, a \u200dcombination of healthy inflation and corporate transformation \u2013 with many companies seeking to streamline and focus on \u200ctheir core businesses \u2013 could continue to drive higher profitability and shareholder returns in 2026. <\/p>\n
On top of that, the government\u2019s lower house just passed \u2060a US$117-billion supplementary budget to fund massive fiscal stimulus, which should support the broader economy. <\/p>\n
Japan is the only major economy where we expect interest rates to rise in 2026, but that should give banks a \u200bboost and is unlikely to be a significant drag on growth.<\/p>\n
In emerging markets, earnings may be supported by a weaker dollar, lower global interest rates and a flow of money and investment as global supply chains realign to adapt to trade tensions and geopolitical friction. <\/p>\n
Finally, my home market of the UK \u2013 which has outperformed the U.S. this year without the help of any high-profile AI winners \u2013 has the potential to offer steady, stable returns, especially with valuations currently among the lowest in the developed world. The challenge for investors is to identify quality British companies that \u200bcan overcome the negative sentiment still hanging over the country.<\/p>\n
It\u2019s a similar story for sectors. It has not all been about U.S. tech.<\/p>\n
European banks have outperformed the \u201cMagnificent Seven\u201d by 40 percentage points, in local-currency terms, over the last five years. Yet there is no discussion of a bubble here. Valuations remain below long-term averages, and our analysis shows that European banks as a group will return around 24% of market cap to shareholders over the next three years via dividends and buybacks.<\/p>\n
Healthcare stocks have had less success recently, trailing the market over the past few years. Yet this traditionally defensive sector – where demand is largely independent of economic cycles – has historically demonstrated strong and consistent earnings growth, even during times of market stress.<\/p>\n
Healthcare stocks now trade at a \u206028-per-cent discount to global equities – a level seen only twice in the past 30 years, according to our analysis. On both occasions, the sector returned more than 20 per cent over the \u2060following 12 months.<\/p>\n
Even within the AI theme, there are ways to gain exposure without paying scary prices. AI power demand has highlighted the need for investment in clean energy and grid infrastructure, including the utility companies that \u200cpower data centers.<\/p>\n
Importantly, both clean energy stocks and listed infrastructure companies are trading at a discount to the overall market. AI doesn\u2019t have to be expensive. <\/p>\n
The AI boom could, of course, pick up yet more steam in 2026 \u2013 especially if returns from efficiency gains start to become more apparent. But high valuations may keep markets on edge regardless. Investors wanting less exposure to the risk have plenty of options.<\/p>\n","protected":false},"excerpt":{"rendered":"Helen Jewell is International CIO, Fundamental Equities, at BlackRock For equity investors seeking a smooth ride in 2026,…\n","protected":false},"author":2,"featured_media":361898,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[62,901,276,277,888,902,879,877,903,49,48,876,895,896,891,878,875,46,549,295,894,887,914,880,881,893,889,890,884,904,885,909,910,912,907,911,905,908,882,898,899,714,897,906,865,61,900,892,886,883,913],"class_list":["post-361897","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-alberta","tag-artificial-intelligence","tag-artificialintelligence","tag-arts-news","tag-bc","tag-breaking-news","tag-breaking-news-video","tag-british-columbia","tag-ca","tag-canada","tag-canada-news","tag-canada-sports","tag-canada-sports-news","tag-canada-trafficcanada-weather","tag-canadian-breaking-news","tag-canadian-news","tag-economy","tag-education","tag-environment","tag-federal-government","tag-foreign-news","tag-globe-and-mail","tag-globe-and-mail-breaking-news","tag-globe-and-mail-canada-news","tag-government","tag-life-news","tag-lifestyle","tag-local-news","tag-manitoba","tag-national-news","tag-new-brunswick","tag-newfoundland-and-labrador","tag-northwest-territories","tag-nova-scotia","tag-nunavut","tag-ontario","tag-pei","tag-photos","tag-political-news","tag-political-opinion","tag-politics","tag-politics-news","tag-quebec","tag-sports-news","tag-technology","tag-travel","tag-trudeau","tag-us-news","tag-world-news","tag-yukon"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/361897","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=361897"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/361897\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/361898"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=361897"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=361897"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=361897"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}