The firm has forecast a supportive 2026 backdrop as structural shifts, currency pressures and tech-driven growth reshape investment risks and opportunities.
Fidelity International looks to enter 2026 with a constructive outlook for risk assets, supported by moderating inflation, resilient growth and generally accommodative policy.
However, the firm has warned that deep structural shifts, including geopolitical fragmentation and sustained pressure on the US dollar, may create a more complex investment landscape.
Matthew Quaife, global head of multi asset at Fidelity International, said the near-term environment looks positive but masks longer-term fragilities.
“While we see positive drivers heading into 2026, the longer-term backdrop is more complex. Beyond the medium-term stability is a creeping global fragmentation, following years of progressive globalisation and debt accumulation,” he said
Quaife added that “the value of the dollar is now a strategic policy tool”, and expects deliberate depreciation over coming years. This, he argued, will require investors to rethink exposure to US dollar risk, with assets such as gold and the euro likely to offer greater resilience.
Given the weight of US equities in global benchmarks, Fidelity suggested non-US investors may need to reconsider hedge ratios in a world where the US dollar faces structural headwinds.
Artificial intelligence continues to define US equity market leadership. Niamh Brodie-Machura, chief investment officer, equities, said: “The changes brought about by new technology will be as dramatic as those of the internet in the 1990s, and in the US tech leaders we have companies with the ammunition necessary to deliver the scale of investment required.”
However, she cautioned that uncertainty around AI’s evolution heightens the importance of identifying genuine winners, noting that valuations have broadly risen and not all companies will ultimately justify their pricing.
Brodie-Machura also said the productivity gains needed for AI to work as a business model will likely accelerate workforce reductions.
“It is difficult to see that happening without some movement on corporate layoffs, of which there are already signs,” she said.
While this may support profits and equity markets, it risks weighing on American consumers, who account for nearly 70 per cent of US GDP, according to Brodie-Machura.
She added that earnings fundamentals look solid heading into 2026, with IT sector profit growth expected to exceed 20 per cent, but said diversification remains essential, especially amid rising geopolitical tensions.
Meanwhile, Europe’s investment case has shown signs of improvement, supported by falling inflation, lower interest rates and fiscal measures.
Aerospace and defence companies are benefiting from the “re-arm Europe” theme, while broader European corporates are described as global businesses with resilient balance sheets.
China is also highlighted as an increasingly compelling market, with innovation, policy support, attractive valuations and a narrowing technology gap with the US contributing to a more constructive outlook.
Fidelity stated that rising technology adoption and efforts to rein in price wars should help earnings recover, with “indicators of a broader bull market clear to see”.
Japan and Korea are also viewed positively, benefiting from stronger wage growth, improved consumer spending and ongoing governance reforms.
Asia continues to stand out as investors seek alternatives to US dollar-denominated assets. Quaife stated the region’s appeal grows due to “the weaker dollar, a ballooning fiscal deficit in the US, and Asia’s surprising domestic strength”.
Asia’s leadership in AI – from China’s DeepSeek to Korea’s memory chips – is expected to continue driving revenues, particularly as demand for AI servers, chips and datacentre equipment remains strong.
Additionally, the firm stated that Taiwan and Korea’s semiconductor producers are well placed, benefiting from rising prices and volumes linked to the AI upcycle.
With inflation subdued across much of Asia and the US Federal Reserve cutting rates, regional central banks are likely to ease policy further. This is expected to lift demand for Asian local currency government bonds, particularly high-quality sovereigns such as South Korea.
Asia’s high-yield bonds are also seen attracting more interest, supported by low default rates and favourable monetary and fiscal settings. Corporate governance reforms across China, South Korea and Japan are expected to continue lifting shareholder returns.
Fidelity concluded that while volatility and geopolitical surprises remain likely in 2026, supportive policy, technological momentum and resilient macro conditions should keep global markets, particularly Asia, on strong footing for the year ahead.
