After a third consecutive year of 20%+ gains in global equities (MSCI All Country World Index) in 2025, EMEA investors who held and continue to hold excess cash have paid a price in terms of foregone performance.
Indeed, investors that have avoided their home stock market may have missed out even more, given how European equities (MSCI EMU Index) outperformed major peers including the US last year, with a 24.7% gain.
Stocks have not been the only strong performers. Global bonds posted their best results since 2020 last year, while gold climbed 63%,
its largest annual gain since 1979. And the euro strengthened 13.4% against the US dollar, boosting EMEA investors’ purchasing power of US dollar assets.
Looking ahead, we maintain a constructive view on markets, expecting global equities to rise a further 15% by year-end. The outlook is supported by transformational innovation, anticipation of another Fed rate cut, and resilient growth.
EMEA investors should seek to strengthen their core portfolios.
Here are three ways to do so:
1. Top up balanced portfolios across stocks, bonds, and alternatives. A robust core portfolio is the foundation for long-term success. CIO suggests allocating 30-70% of assets to equities, with at least half in US stocks and at least 20% global, including Europe and emerging markets. Up to 30% can be dedicated to structural growth themes such as AI, Power and resources, and Longevity. Fixed income should comprise 15-50% of assets, balanced across government bonds, credit, and private credit, with a five- to seven-year duration and alignment to currency needs. Alternatives—including hedge funds, private markets, and infrastructure—can further enhance diversification and risk-adjusted returns. For EMEA investors, we believe European equities offer attractive valuations and exposure to leading companies positioned for global trends, while local fixed income and alternatives can help manage currency and regional risks, while diversifying USD-denominated private assets.
2. Rebalance portfolios at the start of the year After a year of broad gains, portfolios may have drifted from their strategic allocations. CIO recommends rebalancing at the start of the year: sell relative outperformers, buy relative underperformers, and return to long-term asset allocations. This disciplined approach helps lock in gains, manage risk, and maintain exposure to future growth. For EMEA investors, rebalancing may mean trimming outperforming European stocks and adding to lagging sectors or regions, such as US equities or select emerging markets. It also offers a chance to review fixed income and alternative allocations, helping to maintain a balanced mix that reflects current market conditions and personal risk tolerance. Regular rebalancing is a core part of portfolio management—particularly during periods of volatility—as it helps reduce emotional decision-making and keeps the focus on long-term goals.
3. Enhance core portfolios with wealth preservation and tactical ideas. Strengthening the core isn’t just about asset allocation—it’s also about managing risks and seeking new opportunities. Risk-averse investors can hedge market risks by substituting some equity exposure with capital preservation strategies or adding up to 5% in gold, which has proven to be an effective hedge against market stress and systemic risks. Return-seeking investors can pursue tactical equity opportunities, including structured strategies that offer limited exposure to losses or enhanced yield while waiting to “buy on dips.” Long-term investors can consider alternative investments as diversifiers and fresh return sources, such as private equity, private credit, and infrastructure. CIO suggests that EMEA investors with an “endowment” style may benefit from allocating up to 20-40% to alternatives, with careful manager selection and effective diversification across strategies. This approach can improve portfolio resilience and adaptability to changing market conditions. However, alternative investments can be less liquid, more complex, and carry higher risks than traditional assets, so investors should carefully assess their risk tolerance and investment horizon before increasing exposure.
EMEA investors who maintained higher cash balances have not participated in the recent multi-year rally in equities and other asset classes. With CIO’s constructive outlook for 2026, now is the time to strengthen core portfolios. The start of the year may offer a window for investors to position themselves to capture future growth, manage risks, and achieve long-term financial goals in today’s fluid market environment.
