It’s challenging to write about trends for 2026 when January has started with a series of geopolitical events – more noise for serious investors. Looking back on 2025, we had another solid year with global shares up (not so Australian shares), global rate cuts occurring, and Balanced Funds providing a 9% return. This makes up three excellent return years, averaging 10% over the period. This leads us to this newsletter’s topic: the outlook and trends for 2026.

Early this month, I wrote an article on ‘Swimming between the flags‘, which was well received by many – thank you for your feedback. Given the geopolitical events of January 2026, it’s hard to deny that volatility will persist, creating opportunities for our key investment managers. We believe that 2026 will create another correction opportunity (15% plus) as did 2025 with Trump’s Liberation Day Tariff launch. Saying that, we remain modestly positive. We expect rates in Australia to remain on hold even though we note the recent drop in unemployment to 4.1%. We know there are many pockets of pain across the Australian economy, and our Reserve is not anxious to raise rates.

Our expectation is that our Balanced funds will deliver a 7% return, which is what we seek over rolling periods. We are cognisant that we have had three years of excellent returns, but this remains achievable. While geopolitical risks remain high, we have come to understand that the “bark is often worse than the bite,” and that the impact is less than forecast. Regardless, this will support the price of gold and, to a lesser extent, silver, which we note has been on a stellar run since early December.

AI will remain a dominant theme.

While sample sizes are small, we note that for Australian Companies, the take-up of AI has led to increases in productivity of around 10% and a reduction in employment headcount of circa 4%, usually on the back of Companies not replacing positions.

AI will continue to remain a key theme to watch in 2026. We appreciate that our views are succinct and to the point.

Tom, Nicola and I look forward to discussing these and other issues with you over the coming months.