The value of investments and any income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested.
The CT Universal MAP funds remain “cautiously constructive” heading into 2026 but have tempered their enthusiasm for US equities due to valuation concerns, according to co-manager Keith Balmer.
The fundamental backdrop supports risk assets, with inflation contained, employment robust and corporate earnings solid. Monetary and fiscal tailwinds provide additional support as the Federal Reserve continues cutting rates and the Trump administration continues to increase government spending
“We’re still cautiously constructive on the outlook. We look at the fundamental backdrop that we see globally, but predominantly in the US. The fundamental backdrop is actually pretty decent,” Balmer explained.
“Inflation is under control, a little bit toppy but not enough to be concerned about. Unemployment is still very strong, so everyone's got a job who wants a job and you've got good corporate earnings growth, good profitability, good margins.”
The combination of policy support and solid fundamentals points towards positive equity returns. “If you've got monetary and fiscal stimulus coming into a pretty decent fundamental backdrop, it generally means to say that equities are going to do okay,” Balmer added.
Despite the supportive backdrop, elevated valuations – mega-cap tech stocks linked to the artificial intelligence (AI) revolution have surged in recent years – led the CT Universal MAP funds to reduce their US overweight position in the past few months. “Because of valuation levels and amount the US has rallied post Liberation day we have now removed our long US position and have looked to move away from mega caps by increasing exposure to small caps,” the manager explained.
The initial reduction in US equities coincided with an increase in emerging market exposure, which has become the funds' favoured equity region. The positioning reflects a view that the artificial AI cycle has further to run before disappointment sets in but can be accessed at more attractive valuations in countries such as China.
“I do think there will be a disappointment at some stage in terms of the return on investment that the hyper scalers are going to get from all of this capex spend,” Balmer said.
“But we're not at the disappointing point yet. We’re at the optimistic part of the investment cycle where the world is still excited about of these AI driven tools which are going to improve productivity and profitability.”
Emerging markets offer exposure to the AI theme at lower valuations than US technology stocks. The manager pointed out that some emerging markets have a high allocation to technology, trading on much lower multiples that US-based tech companies.
Furthermore, a weaker dollar typically benefits emerging economies, while tariff concerns have dissipated as China's total trade volumes exceed pre-tariff levels. Chinese exporters have adapted by routing goods through third countries or shipping partially completed products for final assembly elsewhere.
The funds implement the view through broad MSCI Emerging Markets exposure while favouring Asian markets.
In terms of other regions, the CT Universal MAP managers think European stocks “could be interesting” in 2026, although the portfolios have yet to start buying into them in any size.
Balmer noted that Europe is likely to benefit from higher fiscal spending, especially as Germany has released its debt brake, and increased investment in defence. One important catalyst would be a peace deal between Ukraine and Russia.
“If there is a good outcome in terms of Ukraine-Russia, I think Europe will probably benefit the most from an equity market perspective,” he said. “If Russia is allowed back into international markets, it means you're going to get a wave of cheap gas being available across Europe.”
UK equities continue to trade at attractive valuations but the managers struggle to identify what could help them outperform. “UK is cheap but it's always been cheap,” Balmer said. “We just struggle to see the catalyst that's going to realise that cheapness in the UK market.”
He added that the UK market is overweight defensive value-based sectors, such as energy, commodities, utilities and banks: “It’s just not the sector mix that you want in a pretty decent growth environment.”
Japan was the CT Universal MAP funds’ favourite market in 2024 but, although the managers still like the country’s corporate governance story, they took the position off over concerns around dollar weakness and yen strength. However, this did not play out, with further weakness from the Yen. With the new political leadership under Takaichi, we would expect more stimulus to follow and think this could work out well for Japanese equities and have increased exposure accordingly.
Within fixed income, the CT Universal MAP range favours government bonds over credit markets where spreads have compressed to multi-decade tights. This means “there’s not a huge amount of excess return going to come from spread compression”.
Government bonds offer more attractive risk-reward characteristics, with gilts particularly favoured over US Treasuries as the UK's fiscal conservatism under the Labour government creates a supportive environment. There’s also some regional plays in sovereign debt, such as a preference for markets such as Spain and the Netherlands over Germany.
That said, the team think Treasuries have a place in the portfolios, especially as the US continues with its interest rate cutting cycle and the need for protection given elevated equity valuations.
“If you think about where valuations are in the States, it won't take much bad news to lead to a decent pullback in the equity market,” Balmer said.
“It’s not our base case but if we do have a bit of a growth shock then you're going to want to have some duration in the portfolio to protect from the equity beta. You’re currently getting paid in real terms to hold that protection therefore we think it’s a pretty decent trade.”
The overarching message from the CT Universal MAP remains one of pragmatic vigilance despite the team’s cautiously optimistic mindset and constructive positioning.
“The data's telling us that the world's absolutely fine but clearly events of the past few years show you that actually the world can change very very quickly. And in which case our optimistic outlook could also quickly sour,” Balmer said.
“Look out for inflation going higher than expected. Look out for unemployment data getting worse than it already is. Those scenarios playing out could mean our base case changes quite radically, quite quickly. We’ll be very alert to changes and react accordingly: what active management is all about.”
More information on the CT Universal MAP ranges can be found here.
IMPORTANT INFORMATION. FOR PROFESSIONAL INVESTORS ONLY. Your capital is at risk.
Columbia Threadneedle (UK) ICVC III is an open-ended investment company structured as an umbrella company, incorporated in England and Wales, authorised and regulated in the UK by the Financial Conduct Authority (FCA) as a UK UCITS scheme.
The current Prospectus, the Key Investor Information Document (KIID), latest annual or interim reports and the applicable terms & conditions are available from Columbia Threadneedle Investments at Cannon Place, 78 Cannon Street, London EC4N 6AG, your financial advisor and/or on our website www.columbiathreadneedle.com. Please read the Prospectus before taking any investment decision.
This material should not be considered as an offer, solicitation, advice or an investment recommendation. This communication is valid at the date of publication and may be subject to change without notice. Information from external sources is considered reliable but there is no guarantee as to its accuracy or completeness.
In the UK: Issued by Columbia Threadneedle Management Limited, No. 517895, registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.
Columbia Threadneedle Investments (Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies.
© 2026 Columbia Threadneedle. All rights reserved.