For Australian wealth managers – whose portfolios are heavily exposed to global equities, infrastructure assets and cross-border capital flows – the shocks of early 2025 underscored how quickly offshore developments can ripple through local returns.
Those shocks, including the first “Triple-Red” moment of the century, highlighted the vulnerability of global linkages, despite a later rebound driven by the AI build-out, according to MSCI.
By the end of 2025, the firm said it feels like a safe bet that investors are living through historic times – yet the precise nature of that moment remains deeply uncertain.
“Is our historic moment defined by politics? Do we stand on the precipice of a new European war? Will we witness a rejuvenated American hegemony under a Trump-Monroe Doctrine? Or is the moment defined by technology? And if so, what exactly is the nature of the AI beast – is it bringing us towards Utopia or Armageddon?,” chief research and development officer Ashley Lester asked.
He said investors heading into 2026 will continue to operate in a world where growth, innovation and adaptation remain remarkably resilient, even as the institutions underpinning global markets show clear signs of strain.
“2026 will be defined less by the emergence of new themes than by the evolution of those already in motion.
“The durability of institutional frameworks, the capacity of AI-related investment to maintain its pace, the ability of energy and data-centre systems to keep up with that pace, and the resilience of private-credit structures will each influence the others, often in ways only visible in hindsight.”
MSCI said market exceptionalism remains the dominant narrative, but disruptions such as the DeepSeek shock and April’s market dislocation reveal how fragile that leadership can be.
Europe and emerging markets outperformed early, before US mega-caps once again took the lead later in the year.
As 2026 approaches, the first-half break in US exceptionalism – driven by shifting perceptions of US institutions and technological leadership – increasingly looks like an interregnum rather than a full regime change.
“The US remains the main game for investors seeking earnings growth in their portfolios, albeit at a formidable price. On a forward-earnings basis, the US is priced at nearly 23x, compared with about 15x for Europe and just 13x for EM.”
MSCI’s latest Investment Trends in Focus 2026 report showed AI remains the centre of gravity heading into 2026, with roughly 80 per cent of AI-linked market capitalisation located in the US.
Companies powering the AI boom now account for more than 40 per cent of global R&D and 20 per cent of global capex, while power and grid operators are emerging as critical enablers.
Crucially, AI’s influence is moving well beyond NVIDIA to the physical backbone of power generation and data centres.
According to the International Energy Agency, global data-centre electricity consumption is set to grow at a 15 per cent annual rate through 2030, compared with 4 per cent growth for electricity overall.
AI-optimised servers alone are expected to grow at a 30 per cent annual rate, with data centres accounting for nearly half of US electricity demand growth through 2030.
“The global scaling of AI places heightened attention on the physical systems behind it, reshaping utilities and clean energy markets and reversing multi-year trends.”
At the same time, private credit is taking on a larger role in financing large-scale, AI-related infrastructure. Semi-liquid credit vehicles have expanded rapidly, but MSCI warns that stress indicators are flashing as AI-driven capital demand converges with credit-quality challenges and liquidity promises.
“In addition, the rise of semi-liquid fund structures – often called evergreen or open-ended vehicles – has reshaped the private-credit fundraising landscape. Annual flows into semi-liquid private-credit funds have grown from US$10 billion in 2020 to a projected US$74 billion for 2025, even as closed-end fundraising has slowed,” Lester said.
Asset managers are increasingly tapping wealth channels that prioritise periodic subscriptions and redemptions over traditional multi-year lock-ups.
“This flexibility, however, doesn’t create true liquidity. Limited quarterly redemption windows and withdrawal gates mean investors still face constraints. When they do get access to their capital, it is at general partner (GP)-issued marks that are subjective and opaque – an important consideration as these products expand to investors with limited experience evaluating private-market valuations.”
According to Lester, a familiar tension is resurfacing.
“Liquidity promises resting on fundamentally illiquid, multi-year loans. Managers rely on cash buffers, credit facilities or secondary sales to meet redemptions. So far, this model has worked, but it hasn’t faced a true test.”
MSCI warned that a spike in defaults, a freeze in secondaries or a surge in
redemption requests could expose deep fault lines – recreating the maturity mismatch that amplified stress during the 2008 crisis by lending long while promising liquidity short.
“In the background, credit-quality concerns are quietly mounting. Two years of elevated base rates have tested borrowers’ capacity to absorb higher interest costs.”
MSCI Private Capital Universe data through Q2 2025 showed write-downs of 20 per cent have more than tripled among senior loans since 2022, while around 13 per cent of mezzanine loans have seen values halved.
Managers have leaned on repricing and amendments to stabilise portfolios, but those measures may be masking deeper stress.
For now, performing loans are generating sufficient income to offset losses, yet the growing trickle of bankruptcies is becoming harder to dismiss.
“The question for 2026 is whether semi-liquid credit vehicles can withstand a more volatile backdrop in which AI-driven capital demand, challenges to credit quality and liquidity promises converge,” Lester added.
