IN FOCUS6-8 min read
Schroders Equity Lens January 2026: your go-to guide to global equity markets
A sign of a “healthy” bull market, and how to hedge against AI risk without selling equities.
Authors
The January 2026 edition of the Schroders Equity Lens is now available: Schroders Equity Lens
Summary:
- Markets everywhere are hitting all-time highs in early 2026, after soaring in 2025. The current US bull market is the second longest and second strongest in at least 100 years (slides 6-7).
- Investors are re-assessing passive exposure to US-centric global indices, after Europe and emerging markets returned over 30% in 2025 (in USD terms), roughly doubling the US return (slide 8, 27)
- There are signs of speculative behaviour in some areas, such as unprofitable tech, but this is not an indiscriminate bull market. The average correlation between members of the Magnificent-7 has fallen towards zero and performance dispersion is high. This is a healthy sign that investors are differentiating. Fundamentals matter. (Slides 9-11)
- Investors should not fret over all-time highs: returns have been better/similar if you invested at these times historically than others. Being scared off by them would have cost significant long-term wealth (slides 11-13).
- The cycle: US equities rally when the Fed re-starts cuts and there isn’t a recession. This is the environment we envisage (slides 14-17)
- Investors who are worried about AI risk but don’t want to sacrifice equity exposure should consider value equities. They have a low correlation with AI-stocks and have delivered significantly better outcomes in down-markets for AI-stocks (slide 18).
- Buyer beware: most passive approaches to value investing are unlikely to shield you from AI/tech risk. Most have significant exposure to Magnificent-7 and/or other technology names. To manage this properly, you need an active approach (slide 19).
- A reminder of long-term stock market experience (slides 20-25):
- 10%+ falls happen in more years than not, 20% falls once every four years
- on average each year, at some point the market falls by 15% and rises by 23%
- when volatility rises it will feel scary but jumping ship at these times would have been damaging to your wealth
- although the ride is bumpy, equities have been less risky than cash when it comes to delivering long-term inflation-beating returns
- there is always a reason to worry but, in the long-run, stocks have beaten bonds which have beaten cash
Charts of the month:
Authors
Теми