Quarterly Outlook
Q4 Outlook for Investors: Diversify like it’s 2025 – don’t fall for déjà vu
Jacob Falkencrone
Global Head of Investment Strategy
10 questions that matter going into 2026 (and what to check in your portfolio)
Charu Chanana
Chief Investment Strategist
Key points:
- 2026 may be less about a neat “base case” and more about a regime shift—the market can reprice what matters most (growth, inflation, fiscal, geopolitics, concentration).
- The biggest trap is false comfort: the same trades can look defensive… right up until they become crowded.
- Diversification won’t be about owning more tickers. It’ll be about owning different risk drivers—and knowing what you really own when the story breaks.
Is 2026 the year the earnings test finally replaces the “AI story” as the market’s main pricing engine?
2025 rewarded the narrative: capex, scale, and the promise that AI monetisation would show up “soon.” 2026 is where markets may get less patient and more forensic: show me margins, show me pricing power, show me cash flow.
The winners can still win—but the easy beta may fade. In a world of high expectations, “good” results can be punished if they’re merely not amazing.
Check your holdings: Do you own a lot of the same mega-cap AI names (directly or via broad US growth funds).
Balance idea: Investors may consider seeking earnings breadth, for example by including some companies with steadier cash flows and reasonable valuations.
Risk to note: Diversifying away from the leaders can mean lagging if the AI trade keeps powering ahead.
Are we underpricing a world where fiscal policy matters more than central banks?
The last decade taught investors to obsess over the Fed. The next decade may be shaped more by government budgets, debt, and bond issuance, plus election-driven policy shifts.If fiscal is the louder force, central banks may be reacting—not leading—and “support” may look different.
Check your holdings: Are you relying on falling rates and central bank reassurance to carry your portfolio?
Balance idea: One approach could be to seek a more ‘all‑weather’ mix rather than relying solely on falling rates.
Risk to note: Long bonds can still outperform if growth weakens, inflation falls faster than expected, or markets price deeper Fed cuts.
If the Fed keeps cutting, why would long bonds rally… unless growth breaks?
It’s a clean story: “cuts = bonds up.” But the long end of the bond market often needs a reason—usually weaker growth—to rally meaningfully.If growth holds up, long-term yields can stay elevated and long bonds can still swing around if term premium can stay sticky and deficits can keep issuance heavy.
Check your holdings: Are you treating long-term bonds as your “safe” anchor?
Balance idea: Some investors diversify rate exposure by combining shorter, higher‑quality bonds with a smaller allocation to longer duration.
Risk to note: Long bonds can fall even during cuts if inflation worries or bond supply keep yields high.
If the USD rebounds, who feels it first: EM risk, commodities, or US multinationals’ earnings?
A stronger USD often hits the most sensitive areas first: EM currencies and risk appetite, then commodities, and later global earnings via currency translation.
It’s rarely a gentle move—and it can tighten financial conditions globally.
Check your holdings: How much of your portfolio depends on a weaker USD (EM funds, commodities, non-US equities)?
Balance idea: Currency exposures can be diversified so that global allocations are not all leaning the same way on the USD.
Risk to note: FX moves can reverse quickly—hedging or rebalancing can reduce risk, but it’s never perfect.
Will “higher for longer” morph into “volatile forever” as inflation becomes less predictable?
The real risk isn’t inflation staying high. It’s inflation becoming erratic—more sensitive to supply shocks, geopolitics, climate events, and policy intervention.That kind of world is hostile to complacency: it keeps correlations unstable, makes policy guidance less valuable, and can make “set-and-forget” disappoint.
Check your holdings: Are you built for calm markets (one style dominates, low shock protection)?
Balance idea: Some investors use ‘shock absorbers’ such as maintaining liquidity, limiting leverage, and diversifying across return drivers.
Risk to note: Holding more liquidity or hedges can reduce upside when markets trend higher.
If real assets led in 2025, is 2026 a mean-reversion year—or the start of a longer scarcity cycle?
Mean reversion is tempting: “they’ve run, so they’ll cool.” The structural question is bigger: are energy, metals, and infrastructure becoming strategic inputs again?If scarcity is real, 2025 may have been a preview—but if demand slows, “hard assets” can correct sharply.
Check your holdings: Did you chase real assets late, or avoid them entirely?
Balance idea: If you own them, keep sizing disciplined and diversify within the theme; if you don’t, avoid all-or-nothing thinking.
Risk to note: Commodities and related equities can be volatile and can fall even in inflationary narratives.
Does the next equity drawdown come from a macro shock… or from positioning/crowding in the same “safe winners”?
Markets don’t always break because the economy breaks. Sometimes they break because everyone owns the same lifeboats.Great companies can still be risky if positioning is one-sided and expectations are stretched.
Check your holdings: Are your “defensive” holdings actually the same crowded trade everyone owns?
Balance idea: Reduce single-trade risk: spread exposure across different styles (growth + value + quality + cash return) rather than one “winner basket.”
Risk to note: Broadening out can dilute performance if the winners keep winning.
If geopolitics stays hot, do markets keep treating it as noise—until one day it’s not?
The market’s default setting is to discount geopolitics—right up until it hits energy flows, shipping routes, sanctions, cyber risk, or supply chains in a measurable way.The uncomfortable part: the tipping point is rarely telegraphed. It arrives as a “small” headline that changes behaviour—insurance costs, freight rates, inventory hoarding, or policy response.
Check your holdings: Are you exposed to fragile supply chains or big energy input costs without buffers?
Balance idea: Add resilience, like include some assets that historically cope better with supply shocks (without turning the whole portfolio into a geopolitical bet).
Risk to note: Geopolitical hedges can be costly if tensions ease or markets move on.
If valuations stay rich, do markets pay for growth, durability, or cash returns—and which one gets punished first?
When valuations are high, markets get picky about the type of quality. In choppier regimes, durability and cash returns can matter more—but leadership can rotate fast.Consensus trades don’t need bad news; they just need less good news.
Check your holdings: Are you paying any price for “quality growth,” or chasing yield without checking sustainability?
Balance idea: Blend the three virtues—growth, durability, and sustainable cash returns—without overloading one.
Risk to note: Rotations can be sharp; blending styles may smooth outcomes but won’t eliminate drawdowns.
Is 2026 the year investors stop diversifying by assets and start diversifying by risk drivers?
“Diversification” often means more tickers that still behave the same in stress.2026 may reward portfolios built around different exposures: rates sensitivity, growth sensitivity, inflation sensitivity, liquidity sensitivity, FX sensitivity, and geopolitical sensitivity.
That doesn’t mean avoiding equities or loving bonds—it means knowing what regime each holding is secretly betting on.
Check your holdings: If both equities and bonds fall together, what else do you have?
Balance idea: Build a mix that can live through different worlds (growth surprise, inflation surprise, USD swings, liquidity shocks).
Risk to note: In severe stress, correlations can rise across many assets—diversification helps, but it’s not a shield.
Investment strategy lens for 2026
I’m not walking into 2026 with “answers.” I’m walking in with a hierarchy of questions—because the market is shifting from a story-led regime to a constraint-led regime: fiscal constraints, supply constraints, geopolitical constraints, valuation constraints.
If there’s one year-end reminder worth keeping: the biggest errors usually come from assuming tomorrow will reward the same exposures as yesterday.
This material is marketing content and should not be regarded as investment advice. Trading financial instruments carries risks and historic performance is not a guarantee of future results.
The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options..
The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options..
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