Global equity investors are heading into the end of the year facing a market shaped by two powerful and sometimes conflicting forces: the continued dominance of artificial intelligence (AI) and a growing recognition that resilience, not just efficiency, will determine which companies and regions can sustain returns through the next cycle.
As Trustnet kicks off its outlook series for the year ahead, fund managers say portfolios need to be built for a world where concentration risk, geopolitics and operational shocks are no longer secondary concerns but core investment variables.
From efficiency to resilience
Markets have stabilised after a period marked by repeated global shocks, but the experience has changed how investors assess companies, according to Paul Schofield, manager of the Royal London Global Equity Select fund.
Pandemics, trade disputes, regional conflicts, cyber incidents and extreme weather have exposed the limits of hyper-efficient business models, prompting a reassessment of what underpins sustainable returns.
“The question has shifted from ‘How lean can you be?’ to ‘How shock-proof is your business model?’,” he said.
This change has clear implications for investors as resilience requires capital – whether through multi-sourcing supply chains, reshoring production or upgrading cyber defences. In the near term, that spending can compress margins, widening the gap between companies with strong balance sheets and those without.
“Investors will need to distinguish between management teams making strategic, well-sequenced resilience investments and those spending tactically without a coherent plan,” Schofield said, warning that only the former are likely to strengthen competitive positions over time.
“Portfolios now need to incorporate resilience as a core lens, with balance sheets, pricing power and regional exposure playing a larger role than they have in recent years”.
Artificial intelligence and the US
US government policy is increasingly reinforcing this focus on resilience, with public capital supporting AI-linked technologies, critical minerals and domestic semiconductor capacity as strategic priorities rather than purely commercial ones.
Against that backdrop, James Thomson, manager of the Rathbone Global Opportunities fund, said the “arms race” around AI shows little sign of slowing and should continue to underpin US market leadership. At the same time, he warned that the concentration this has created is extreme.
“Defensives and cyclicals have traded predominance over past decades, yet today both have shrunk before a tech-trained one-trick pony,” Thomson said, describing index concentration as “eyewatering”.
This leaves investors exposed if they rely too heavily on a narrow group of mega-cap stocks. While the US is likely to remain the main driver of global sentiment, he said a broader, more balanced portfolio could deliver better returns in 2026 as market leadership eventually widens.
The challenge is timing that transition during a technology super-cycle, which he expects to produce sharp swings as sectors run “red hot and then ice cold”.
Martin Connaghan, senior investment director of Murray International Trust, struck a similar note of caution. Elevated valuations and market concentration do not guarantee a correction, he said, but they do leave little margin for error. When expectations are high, “gravity can be a considerable force”.
BlackRock, by contrast, remains comfortable maintaining an overweight to US equities. Vivek Paul, global head of portfolio research at the BlackRock Investment Institute, said the firm continues to favour US stocks on the broadening AI theme, supported by strong earnings and balance sheets among large technology companies.
However, he noted that AI-related benefits are spreading beyond the US, with knock-on effects in markets such as Taiwan, South Korea and China.
Other resilience themes: Data security, energy and supply chains
Resilience is also reshaping how companies approach technology more broadly. Schofield said digital investment is increasingly focused on reliability rather than marginal efficiency gains.
Tools such as AI-driven forecasting, digital twins and improved cybersecurity are being used to anticipate disruption and respond more quickly, while cloud systems reduce dependence on individual sites.
“The investable takeaway is clear: providers of security, data integrity, observability and predictive analytics should be structural beneficiaries as enterprises rebuild operating stacks for reliability rather than pure efficiency,” he said.
Another key component of resilience is energy security. “The energy transition is becoming a resilience play,” Schofield said, arguing that investment in grids and storage – particularly in Europe – is essential for maintaining reliability as systems face greater stress.
For equity investors, this creates opportunities across infrastructure, utilities and industrials, particularly where spending is backed by long-term public and private commitments rather than short-term political cycles.
Finally, as supply chains seek to become more resilient through geographical diversification, Schofield sees multi-year opportunities in logistics, power and industrial automation.
Looking particularly interesting are Southeast Asian markets, which continue to attract manufacturing investment as companies pursue ‘China-plus-one’ strategies. He highlighted Vietnam and Indonesia, which are prominent in electronics and greenfield manufacturing, as particularly interesting.
Asset allocation
Despite the risks, managers remain broadly constructive on equities, though with a stronger emphasis on selectivity and diversification.
David Aulja, multi-asset fund manager at Invesco, said his team views the current backdrop as consistent with a recovery phase of the cycle, typically associated with “modest returns” across risk assets.
“As a result, we are looking to selectively increase overall portfolio risk, thus favouring an overweight to equities relative to fixed income,” he said.
Within equities, Invesco is neutral between the US and developed ex-US markets, balancing stronger US earnings momentum against a bearish view on the dollar, which could support unhedged international exposures.
Paul Green, co-portfolio manager of CT Global Managed Portfolio trust, also remains constructive but highlighted the risk that market expectations for interest rate cuts could prove optimistic if inflation stays sticky.
Political uncertainty and the reliance of parts of the US economy on sustained AI-related capital expenditure add further complexity, he said.
Beyond the US, BlackRock favours Japanese equities, citing solid growth and shareholder-friendly reforms, and sees India as one of the most compelling long-term opportunities in emerging markets. Demographics, productivity potential and India’s position as a beneficiary of geopolitical fragmentation underpin that view.
Paul added that portfolio construction needs to adjust to the possibility that long-dated US Treasuries may no longer provide the diversification investors expect. In response, BlackRock favours a more scenario-based approach, selective use of alternatives and a willingness to look beyond traditional market-cap benchmarks.