FNArena’s Weekly Insights – Monday, 24 November 2025

In Weekly Insights this week:

• Wilsons’ Pragmatic Outlook For 2026
• Australia, The Non-AI Refuge
• Post Sell-Off Opportunities
• AI Remains The Theme In 2026
• A Lame Duck USD
• Diversification Is King
• Bull Market To Broaden In 2026
• Are Cyclicals Next Year’s Champions?
• Active Versus Passive
• FNArena Talks

By Rudi Filapek-Vandyck, Editor

Focus On 2026

As is custom for this time of the year, investment strategists are reviewing and refreshing their outlook and preferences for the calendar year ahead.

As 2026 approaches, key central themes include the AI megatrend and US exceptionalism, as well as USD weakness, central bank policies, a broadening of share markets’ momentum and the position of the ASX inside a global asset allocation framework.

Below are some of the more interesting views and conclusions put forward (I hope).

Wilsons’ Pragmatic Outlook For 2026

One of the more pragmatic views that entered the FNArena inbox this week was an updated Australian share market strategy report by Wilsons Advisory.

In it, the strategists simply conclude a ‘correction’ had become overdue as investor anxiety over elevated valuations collided with the RBA no longer cutting its cash rate.

Short-term, the problem of elevated valuations hasn’t gone away, certainly not at the top end of US equities, but earnings growth is making a come-back locally, albeit very much dominated by resources, and the global economic outlook for next year (2026) continues to be positive.

Not to be dismissed also is that while the RBA is now officially on ‘pause’, other central banks, including the Federal Reserve, are still stimulating.

Wilsons’ inference is equities’ bull market remains poised to continue throughout 2026 and positive vibes globally will equally reflect well on the local market.

Wilsons’ mildly positive view also assumes the RBA is nowhere near to start hiking rates again. Over time, two more rate cuts are still considered more likely.

The strategists’ pragmatism shines through in the observation that, irrespective of notable weakness in November, Australian equities can still finish the year with a total return that once upon a time was considered ‘normal’.

At Friday’s close, the ASX200 including dividends had returned 6.38% year-to-date. A positive rally into the new calendar year has indeed the potential to pull this year’s total return to the 15-year average of circa 8%.

One fact best not ignored is the strategists’ overall Neutral stance on Aussie equities (inside global asset allocation context) is equally based on inhouse projections of a stronger AUD.

Without it, a more negative view would have been in place; i.e. the Australian market remains poised to underperform against global peers, but the stronger currency should reduce the relative under-performance for local investors.

Australia, The Non-AI Refuge

A better global environment is also at the centre of UBS strategists’ projections for the year ahead, as are elevated valuations –expected to remain above historical averages for the time being– and the continuation of the US-led AI and AI-infrastructure story.

Combining it all for the year ahead, UBS’s fresh target of 8900 for the ASX200 by end-2026 implies a similar or slightly better performance, depending on what happens over the final weeks of calendar year 2025.

UBS is in particular positive about the earnings growth outlook for corporate Australia, expecting a year of 10%-plus growth lays ahead, carried by a strong rebound for the mining sector.

Consumer stocks and even the “much maligned” healthcare sector should also actively contribute to the earnings recovery (with margin increases the additional kicker).

Trading on an above-average PE ratio of circa 18.7x (forward-looking), UBS notes the long-run average for Australian equities is 16.4x, but the post-GFC average sits at 17.5x.

On this basis, the strategists are not that much worried about the high starting point, acknowledging the local market is not cheap, but rather “reasonably” valued.

With the technology sector only representing about 6% of the index in Australia, UBS sees the Australian market as offering protection if US markets were to keel over next year.

Contrary to Wilsons’ strategists view, UBS sees Australia standing out amidst multiple uncertainties globally. The US economy is closely linked to AI investments and Chinese property markets remain in the doldrums with GDP growth expected to only grow modestly by 4.5% in 2026.

UBS’s positive outlook for the Australian economy is based upon the view consumer spending is poised to improve on the lagging impact from RBA rate cuts already delivered in 2025. In the slipstream of the delayed stimulus, the Aussie dollar is projected to strengthen.

UBS strategists spend a number of paragraphs explaining this year’s share market performance should not be seen as disappointing; rather it is more of a ‘normal’ return year when placed inside proper historical context.

Admittedly, posits the strategy update, the outlook for equities, both internationally and locally, remains tightly connected to what happens with AI. UBS thinks 2025 is likely the equivalent of 1998, i.e. there should be another up to two years left in that megatrend.

Here, the fact the ASX is less exposed to the theme should serve it well in case of a major meltdown (if it were to take place). A much more damaging risk off event would occur if it were related to economic growth. UBS notes such periods of stress have remained short-lived in recent years.

When it comes to AI in the US, Citi analysts recently concluded with the following:

“We definitely are of the view that AI is mostly a positive game changer as to long-term productivity trends.

“Ultimately, this should come with investor confidence in higher than otherwise earnings growth and valuations.

“However, we also have to recognize that as the investment is playing out and AI users implement company specific cases, there is bound to be a degree of uncertainty as to

“1) whether the investment is justified, and
2) where there may be a negative fallout aspect to those productivity enhancements.

“Thus, per recent price action, it seems pretty intuitive that many investors would look to lock in recent gains headed into year-end but should also be expected to re-engage early into next year.”

Post Sell-Off Opportunities

Ord Minnett has used the rather sharp de-rating in ASX-listed Growth and High PE stocks to highlight opportunities among its key technology sector ideas:

• Car Group ((CAR))
• Energy One ((EOL))
• Hansen Technologies ((HSN))
• Life360 ((360))
• Qoria ((QOR))
• Xero ((XRO))

AI Remains The Theme In 2026

The global outlook for equities is now closely intertwined with AI and AI-infrastructure investments and enthusiasm and optimism about the megatrend remain high at Morgan Stanley.

But there’s no denying the trajectory ahead might not be without its occasional potholes and roundabouts.

All in all, the house view for US equities in 2026 remains that returns should be solid, but the path towards those returns won’t be smooth. US trade policy remains a source of uncertainty, as is the rivalry between the US and China.

The primary risk is for the AI capex boom failing to deliver substantial productivity gains in a timely manner, the strategists argue, as this would accelerate leverage faster than output, triggering credit concerns other markets would not ignore.

Morgan Stanley retains a positive view, but also acknowledges “vigilance is a 2026 responsibility”. The advise for investors is to keep a close eye on leverage, on valuations, and on whether investments are translating into real output.

“If those indicators start flashing yellow, our recommendations will as well.”

In the absence of such failure, Morgan Stanley’s focus (and preference) remains firmly with US share markets, with risk assets seen as “primed for a strong 2026”.

Where others might be contemplating relative outperformance through non-US equities, Morgan Stanley sees continued superior returns from US equities. And, indeed, successful AI-driven efficiency gains are an integral part of that view.

Were the US story to come unstuck, the suggestion is there will be little fun in hiding out elsewhere.

Morgan Stanley also favours Japanse equities, and Brazil and India among Emerging Markets, but not EMs as a group, and not Europe either.

Among commodities, the preference is with gold, and with copper and aluminium among industrial metals. The price of Brent is expected to remain anchored around US$60/bbl.

Among the observations made: much of AI and data center-related capex is still ahead.

Morgan Stanley’s three high-conviction calls for the year ahead are:

• US equities outperform the rest of the world in 2026
• Bond markets’ yield curves to steepen noticeably
• Spreads in investment grade corporate bonds will widen (to absorb more issuance related to spending on data centres)

In support of this broker’s view on US equity, the US dollar is no longer seen as a drag on US assets, with the house view having turned ‘neutral’ on the currency on a twelve month horizon.

Over at Federated Hermes, the views on AI productivity gains are among the most positive around, leading to this asset manager increasing its 2026 price target for the S&P500 to 7,800 from 7,500.

Federated Hermes’ outlook statements include predictions such as “Across the world, companies of every stripe are incorporating the AI revolution into their work processes, likely unleashing a new era of productivity gains”.

The Federal Reserve is expected to cut beyond the widely expected two more, US earnings margins should increase, earnings momentum is set to accelerate, with IPO activity and animal spirits among investors to heat up.

On a two-year outlook, Federated Hermes believes it is reasonable to expect the S&P500 to rise to 8600, implying an annual return in excess of 14% — higher than the 12% achieved over the past 50 years.

The view is equally constructive for Emerging Markets.

A Lame Duck USD

Ongoing enthusiasm for ‘US exceptionalism’ at Morgan Stanley stands in  sharp contrast with views at the likes of DBS Group which, coincidentally or otherwise, is headquartered in Singapore.

In its freshly released forecasts for 2026, DBS is toying with the idea the best could well be in the past for the US.

While the risk for economic recession in the US remains low, DBS sees plenty of other problems including a tight labour market, a challenging fiscal position, the Federal Reserve’s independence at risk and the potential damage a sharp correction for US equity markets could inflict on the domestic economy.

The Federal Reserve is expected to deliver two more rate cuts, to 3.50%. The US dollar is described as a “lame duck”, likely entering 2026 “politically wounded and cyclically tired”.

In contrast, most Asian currencies are expected to stabilise in 2026, following lots of volatility this year. The world’s de-dollarisation will continue. The situation in Europe is expected to stabilise.

Among the favourite investment themes are Chinese technology stocks, batteries, certain materials and financials.

DBS sees demand for key metals to slow down in 2026, but still prefers copper and aluminium second for exposure. Taiwan’s fortune now relies on a sustaining of the AI supercycle.

Diversification Is King

Europe-based asset manager Amundi does not necessarily deny 2026 could well continue to print a positive story for risk assets, but its outlook prefers to zoom in on the many risks and uncertainties which, if materialised, could easily generate a very different outcome next year.

As such, Amundi’s view is diversification remains the most effective defence in a world of concentrated equity markets and high valuations.

Investor portfolios are advised to rebalance across styles, sectors, sizes and regions to mitigate risks and capture opportunities, notably in Emerging Markets and European assets.

Amundi too expects the Fed to cut twice in the first half of 2026, to 3.25% and the USD to weaken, but warns: the journey will not be linear.

The ECB is forecast to ease beyond current market expectations, to 1.5% by mid-2026, and the BoE should bring down rates to 3.25%.

Asia is to remain the primary growth engine, despite moderating growth in China (4.4% and 4.2%) and India (6.3% and 6.5%).

Amundi favours exposure beyond the AI-race into the broadening tech theme –including power energy, computing, materials needed to overcome physical constrains that are building– and a combination of defensive and cyclical themes.

In Europe, expectations are positive for Financials, Industrials, Defence and Green-transition sectors, as well as on small and mid-caps.

A negative view on the US dollar also underpins a positive skew towards Asia and Emerging Markets generally.

Bull Market To Broaden In 2026

T Rowe Price is among the most hawkish when it comes to the outlook for RBA policy, arguing persistently high inflation might well have killed off any prospect for more rate cuts.

The problem of higher than forecast inflation might raise its head yet again next year and thus the next change from the RBA could instead involve a rate hike.

The strategists concede that might be more of a 2027 narrative, suggesting Michele Bullock & Co might be sitting on their hands for the whole of 2026.

T Rowe Price has a rather balanced world view, with a preference for Emerging Markets due to high growth potential in combination with cheaper valuations.

In Australia, market leadership is anticipated to shift to resources (materials).

Globally, the AI trade is expected to broaden, and the same broadening is anticipated for equity markets’ momentum generally.

Are Cyclicals Next Year’s Champions?

The Invesco‘s Strategy & Insights Team is firmly of the view the global economy is set to accelerate in 2026.

Add further Fed rate cuts and a weaker US dollar and it’s not difficult to see why the market pendulum is forecast to decisively shift towards cyclical assets.

Among regions, favouritism has shifted towards Emerging Markets and Europe; US equities are now Underweight.

Invesco’s strategy includes a maximum allocation to commodities, but doesn’t include ongoing positive dynamics for gold (zero exposure).

Invesco’s four key investment ideas:

• Chinese equities
• Japanese REITs
• Industrial commodities
• European bank loans

Active Versus Passive

Invesco’s views and projections would receive a lot of agreement from authors responsible for the Key Themes For 2026 publication by Goldman Sachs Asset Management which, essentially, seeks risk mitigation and higher returns through active management in assets and markets that are cheaper priced and have been lagging the top end in the US.

Among the areas of focus are smaller cap companies that equally stand to benefit from ongoing investments in AI infrastructure (expected to remain strong).

A similar approach is being advocated by France-headquartered BNP Paribas, whose outlook report chooses “flexibility” and “selectivity” as the two key strategy words for 2026.

BNP Paribas’ outlook also contains the following prediction: “Expect the Fed to cut US rates further over the next few years than the market currently anticipates”, as well as: “Expect Europe to regain momentum, the US to face uncertainty, and China to focus on medium-term growth”.

While the Chinese economy at large remains challenged, the greatest potential is seen with that country’s technology sector.

US small cap stocks are not expected to sustainably outperform the S&P500, also because the IA megatrend’s strong growth story is anticipated to continue, but BNP Paribas sees this segment as an opportunity to access US growth without expanding exposure to the tech sector.

Franklin Templeton‘s 2026 outlook strategy is equally on par with the idea of a broadening of investment returns beyond US markets and the AI megatrend theme.

Favoured suggestions include:

• Emerging Markets debt and equities
• European equities
• Smaller caps in the US

Equally important: Franklin Templeton emphasises US equities, including the technology sector, should continue to generate “solid” returns next year.

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See also:

https://fnarena.com/index.php/2025/11/20/rudis-view-banks-gold-lithium-us-equities/

Additional reading:

https://fnarena.com/index.php/2025/11/19/rudis-view-buffetts-parting-message/

https://fnarena.com/index.php/2025/11/13/rudis-view-antipa-computershare-iph-lynas-macquarie-rio-tinto-more/

https://fnarena.com/index.php/2025/11/06/rudis-view-amcor-charter-hall-challenger-goodman-woolworths-more/

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FNArena Talks

Video: Broker Moves from the week past: TechOne, Aussie Broadband & Lynas

https://youtu.be/aNZJ-LJVb2Q

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This section appears from now on every Thursday morning in a separate update on the website. See Rudi’s Views for the archive going back to 2006 (not a typo).

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(This story was written on Monday, 24th November 2025. It was published on the day in the form of an email to paying subscribers, and again on Wednesday as a story on the website).

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