Our base case of robust AI investment, broadening earnings growth, resilient economic activity, and moderating inflation supports further equity market gains. The next phase of the market rally is likely to broaden across companies, sectors, and regions. AI remains central, but stronger investment spending, earnings breadth, and cyclical momentum are creating opportunities across a wider range of markets.
Investors should combine a diversified core equity allocation with targeted exposure to transformational innovation and cyclical opportunities. This can support further gains while reducing dependence on any single market driver. There are five ways to position for this environment:
Diversify single-stock exposure
Investors with concentrated single-stock positions should consider broadening exposure across regions, sectors, and investment styles. With the differences between the top- and bottom-performing sectors and stocks remaining high, concentration can significantly affect portfolio outcomes. Excluding strategic holdings, nearly 40% of self-managed equity investors on our platform hold more than half of their equity portfolio in 10 stocks or fewer. Broadening exposure can help portfolios take part in further market gains, while reducing company-specific risk.
Targeted exposure to transformational innovation and longer-term opportunities
AI remains a powerful investment driver. Global AI-related capital expenditure is expected to reach around USD 900bn in 2026 and approximately USD 1.2tr in 2027. The opportunity extends beyond the largest technology companies to semiconductors and hardware, software, power infrastructure, utilities, and industrials.
Longer-term opportunities include power and resources, automation and robotics, longevity, and health care innovation. Areas of focus include grid resilience, renewables, nuclear power, critical minerals, obesity treatments, oncology, cardio-metabolic conditions and neurology, where structural demand and technological adoption can support earnings growth over time.
Position for cyclical broadening
As earnings growth broadens beyond the largest technology companies, investors should consider sectors and markets that could benefit from rising investment, improving financial activity, and resilient consumer demand. This supports exposure to industrials, financials, consumer discretionary, health care and selected regional markets, including Europe, Japan, India, Asia ex-Japan, China, and emerging markets.
Multifactor strategies
As market leadership broadens, multifactor strategies can provide exposure to a wider range of return drivers. By combining quality, value, momentum, size, and other factors, they can reduce reliance on any single sector, style, or market narrative.
Structured strategies
Investors who remain constructive on equities but want a more tailored approach may consider structured strategies. Depending on the structure, these solutions can provide defined exposure to potential market gains. Trade-offs include issuer exposure, liquidity, barriers, and fees, and investors should be willing and able to bear these instruments' unique risks.
