Investment Outlook: Second Half of 2026

Writing a mid-year market commentary is a humbling exercise. The investment themes that looked most compelling at the start of any year rarely unfold exactly as anticipated, and 2026 has been no exception. Nevertheless, taking stock of key themes — and understanding how they might affect a globally diversified investment portfolio — is a worthwhile exercise for any internationally mobile investor.

This commentary reflects our perspective as of June 2026. It is not a prediction. Markets can and do move in unexpected directions, and the appropriate response for most investors is not to try to predict them but to ensure their portfolio is positioned to benefit from a range of outcomes.

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Theme 1: AI and Technology — Continued Dominance or Inflection Point?

Artificial intelligence has been the dominant investment narrative since late 2022. The extraordinary valuations of the largest US technology companies — and the index concentration this has created — are well documented. By mid-2026, the top handful of US technology companies represent a proportion of global equity indices that would have seemed implausible a decade ago.

The bull case for continued AI investment remains compelling: productivity gains from AI are increasingly appearing in corporate earnings reports; the infrastructure buildout (data centres, semiconductors, energy) is accelerating; and competitive pressure to adopt AI is intensifying across virtually every industry.

The bear case is equally worth considering: valuations embed optimistic assumptions; the capital expenditure required to sustain AI infrastructure is enormous; energy constraints are becoming a real bottleneck; and regulatory pressure in both the US and EU is increasing.

For international investors, the key practical question is not whether AI is transformative (it likely is) but whether those transformative gains are already priced into the largest US tech stocks. Investors who are heavily concentrated in US technology through passive index funds should be aware of this concentration risk, even if they choose to retain it.

A balanced position acknowledges the powerful drivers behind AI while maintaining diversification across geographies and sectors that may benefit from AI adoption (healthcare, logistics, industrial automation) rather than simply concentrating in the largest AI infrastructure providers.

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Theme 2: Emerging Market Divergence

The term "emerging markets" covers an enormous and increasingly heterogeneous set of countries, from rapidly growing Asian economies to commodity exporters to frontier markets with quite different risk profiles. Treating EM as a single asset class is less useful than it once was.

In 2026, the key divergences worth monitoring include:

India continues to attract significant capital flows and is frequently cited as the most structurally compelling large EM story. A young, growing population, a digital infrastructure that has leapfrogged older generations of technology, and a government that (despite some concerns about concentration of power) has been broadly pro-market. Valuations are no longer cheap.

Southeast Asia (Vietnam, Indonesia, Philippines, Thailand) benefits from supply chain diversification away from China. Manufacturing investment is growing. These markets are more volatile and less liquid but offer genuine growth exposure.

China remains the most contested large market. The combination of a property market that has experienced severe stress, ongoing regulatory unpredictability, demographic challenges, and geopolitical friction with the West continues to make it a source of investor anxiety. Yet valuations are low by historical standards, and any policy pivot towards genuine stimulus could produce significant returns. Many international investors have reduced China exposure; whether this is the right call is far from obvious.

Latin America presents a mixed picture. Brazil's markets have been buffeted by political and fiscal uncertainty; Mexico continues to benefit from nearshoring trends but faces uncertainty around its relationship with the United States.

For internationally mobile investors who are already living outside their home country, adding EM exposure requires careful consideration of existing concentrations. If you live and work in the UAE, you already have economic exposure to the Gulf and broader emerging world. Additional EM allocation should consider this.

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Theme 3: Dollar Weakening — Narrative vs Reality

The "dollar weakening" narrative has been a feature of investment commentary for several years. The argument runs roughly as follows: US fiscal deficits are enormous and growing; the reserve currency status of the dollar is being gradually challenged; the Federal Reserve will be forced to ease policy more aggressively than markets expect; and therefore the dollar will depreciate.

This narrative has been repeatedly premature. The dollar has proved more resilient than many expected, partly because the US economy has also proved more resilient, and partly because alternatives to the dollar as a reserve and trading currency remain limited.

As of mid-2026, the dollar is showing some signs of the anticipated weakness — but investors should be cautious about positioning aggressively around this theme. Currency prediction is notoriously unreliable. For expat investors with expenses in euros or dirhams, natural currency hedging through holding matching currency assets is more reliable than trying to time dollar moves.

What the dollar debate does highlight is the value of currency diversification. A portfolio entirely denominated in sterling faces currency risk not just from sterling depreciation but from the mismatch between where you earn, where you spend, and where your assets are held.

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Theme 4: The Commodity Supercycle Thesis

The commodity supercycle argument — that we are entering a prolonged period of elevated commodity prices driven by underinvestment in supply and rising demand from the energy transition — has been a recurring theme in recent years.

The thesis has not unfolded in a straight line. Oil prices have been volatile; copper has performed better, driven by genuine demand from electrification; gold has continued its strong performance, supported by central bank buying and de-dollarisation narratives.

Commodities as an asset class serve two functions in a diversified portfolio: they provide some inflation protection, and they offer low or negative correlation with equities in certain market environments. The allocation question is whether the supercycle thesis warrants an overweight, or whether a moderate tactical allocation for diversification purposes is more appropriate.

For most internationally mobile investors, a modest commodity exposure — through a diversified fund or ETF rather than individual commodity futures — provides the diversification benefit without requiring a confident view on the supercycle timing.

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Theme 5: Geopolitical Fragmentation and Its Investment Implications

The investment landscape of the 2020s is being shaped by geopolitical forces more than at any point since the Cold War. The fragmentation of trade flows, the emergence of competing technological standards, and the realignment of alliances all have investment implications.

The practical effects include:

• Supply chain restructuring creates opportunities in "friend-shoring" locations (India, Vietnam, Mexico, Eastern Europe) and costs for companies with concentrated China exposure.
• Defence spending in NATO countries and in Asia is rising. Defence sector equities have performed strongly.
• Energy security is driving investment in renewables, nuclear, and domestic fossil fuel production simultaneously.
• Financial fragmentation — the slow diversification of reserves away from the dollar — supports gold and potentially some EM currencies over a long time horizon.

The appropriate investment response is not to make all-in bets on any one geopolitical outcome (which is inherently unpredictable) but to ensure the portfolio is resilient across scenarios. A portfolio that performs well in a fragmented world (with genuine geographic and sector diversification) also tends to perform reasonably well in a less fragmented world — the upside of diversification over concentration.

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What This Means for Portfolio Allocation

Drawing these themes together, our perspective for internationally mobile investors in H2 2026 is as follows:

Equities. Maintain a diversified global equity exposure. Be aware of US technology concentration in passive index funds and consider whether this concentration matches your risk appetite. Modest EM diversification is appropriate for long-term investors; selectivity by country and sector is more important than ever.

Fixed income. With interest rates having normalised from post-pandemic lows, bonds are once again providing meaningful income and serve their traditional portfolio balancing role. A mixture of government bonds and higher-quality corporate bonds provides useful stability. Duration risk (sensitivity to rate changes) should be managed given ongoing uncertainty about the path of inflation.

Alternatives. Property remains a core holding for many internationally mobile investors. Commodities provide inflation protection and diversification. Alternative strategies (absolute return, infrastructure) can reduce volatility in the overall portfolio.

Currency. Currency management is particularly important for expat investors. Currency matching — holding assets in the currencies you spend — reduces unnecessary volatility. FX hedging on large sterling-denominated positions into euros or dirhams deserves consideration.

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The Most Important Point

The most important investment principle for 2026 — as for every year — is that time in the market consistently beats timing the market. The investors who have done best over the past decades are not those who correctly predicted every market move, but those who stayed invested, maintained diversification, kept costs low, and did not panic during downturns.

This is particularly true for internationally mobile investors who may be dealing with simultaneous complexity in their tax, pension, and investment affairs. Simplicity, clarity, and consistency in investment strategy is valuable in this context. The role of a good independent adviser is to provide that framework — not to predict markets.

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This commentary reflects our views as of June 2026 and is for general information only. It does not constitute investment advice. The value of investments can fall as well as rise, and past performance is not a guide to future returns. Seek professional advice before making investment decisions.

How Global Investments Can Help

Global Investments provides independent investment management and financial planning for internationally mobile individuals around the world. Our portfolios are managed on a globally diversified basis, with currency awareness built in for expat clients. If you would like to review your portfolio positioning in light of current market conditions, contact us to arrange a conversation.