While US markets have led global returns in recent years and continue to attract investment, talk of the end of US exceptionalism has been growing in the background.
AMP’s deputy chief economist, Diana Mousina, recently discussed the topic, attributing the waning structural significance of the US and the dollar, as well as the country’s underperformance this year, to China’s rise rather than to President Trump or his policies.
In its 2026 Outlook, Franklin Templeton has thrown its hat in the ring, with the firm’s chief market strategist, Stephen Dover, pointing to a broadening investment landscape beyond the US.
“The global investment landscape is evolving, due to improving profitability and higher valuations in sectors and regions that have historically been overlooked, and that’s a welcome turn for investors,
“While the US remains a magnet for global investment flows, regions, sectors and asset-classes outside the US are well positioned to benefit in 2026 from monetary easing gaining traction globally and the dollar under pressure,” Dover said.
For 2026, the firm characterised the current investment environment as being driven by three cyclical themes.
The first, broadening growth, expects growth outside the US to pick up – particularly in Europe and emerging markets – as valuations become more attractive and earnings momentum strengthens.
European asset manager Amundi also identified emerging markets as a key growth driver in its 2026 Outlook.
Within the US, the firm acknowledged the economy remains resilient with rising corporate profits, but picked out opportunities beyond large caps. In particular, it said small-caps and cyclical sectors – such as industrials and financials – are poised to benefit from Federal Reserve (Fed) rate cuts and lower debt servicing costs.
Second, the firm said it expects steepening yield curves as the US and other central banks, including the European Central Bank (ECB), ease rates while demand for infrastructure and capital investment rises to support artificial intelligence (AI)-driven innovation and energy projects.
While recent weeks have disrupted certainty around the Fed’s rate cuts, consensus still expects the central bank to continue easing rates.
As the firm explained, a steeper yield curve should, in turn, prompt investors to look beyond cash toward opportunities in duration, credit, and equities.
Franklin Templeton’s third theme for 2026 was continued US dollar weakening, with the greenback having already fallen in value by about 10 per cent year-to-date. The firm attributed this conviction again to Fed rate cuts, as well as a softening US labour market. In turn, it argued this should enhance returns for global investors.
As has already been the case this year, a softer US dollar can boost dollar-rewarded assets like emerging market debt and non-US equities, further reinforcing the firm’s view that opportunities outside the US look promising for 2026.
Longer-term picture
Looking beyond next year, the firm separately identified three secular forces it expects to shape the investment landscape.
Impossible to avoid, the first trend was the age of intelligence, with AI, data infrastructure, and advanced technologies continuing to drive structural capital demand across sectors and regions.
“Of all the investible themes associated with AI, one of the most compelling is the need to ‘feed the beast’ to sate its vast energy appetite.
“New investment will be required in electricity production, transmission and storage. To meet that need, both public and private markets will attract capital, with powerful spillovers to sectors such as engineering, basic materials, rare earths, and industrial metals,” stated the report.
The second trend was the mainstreaming of private markets, with the firm predicting fund innovation, regulatory shifts, and advances in information technology will accelerate their growth in the coming years.
Schroders’ 2026 Outlook similarly suggested a turn towards private markets, arguing that highly concentrated listed markets may drive investors toward private equity.
Finally, Franklin Templeton described the current period as the “big government era”, marked by higher fiscal deficits, industrial policies, and de-globalisation – all of which are likely to raise structural borrowing costs and reshape return expectations, resulting in higher real interest rates for the remainder of the decade.
