Our multi-asset investment views – January 2026
We have downgraded our view on commodities to neutral but continue to like gold as a diversifier.
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Over the month, US economic data confirmed our view that, for now, the US consumer is holding up and labour market conditions are benign. President Trump continues to generate headlines and, from an economic perspective, his pressure on Federal Reserve (Fed) Chair Jerome Powell continues to generate medium term concerns about central bank independence and credibility. While this has not yet had a material impact on near-term outcomes, sustained political interference risks undermining central bank credibility over time. Combined with our above consensus view on US growth, this has led us to remain underweight US Treasuries.
Geopolitical risk is impossible to predict but we need to recognise that the international rules-based order that has been in place since 1945 is being challenged and gold remains a helpful diversifier in this regard. We took profits on our broader commodities exposure when it bounced on the Venezuela news.
With recession risk low and inflation under control, it is difficult to see a catalyst for an equity bear market. Valuations are challenging but we expect corporate earnings to drive returns this year. Last month we diversified our long-standing overweight position in global equities with an allocation to Value stocks outside the US and we maintain this position.
Within bonds, we took profits on our long position in gilts against Bunds. Expectations of the Bank of England (BoE) turning dovish on favourable inflation data have largely played out. Bunds also underperformed on fiscal expansion concerns coupled with softer demand from Dutch pension reform changes. We have established a long position in Australian bonds funded out of Treasuries, as Australia offers better debt dynamics.
We maintain our negative view on the US dollar, especially given risks of a politically induced, dovish Fed, and this month we re-enter our long position in local currency emerging market debt as a means of benefiting from weaker US dollar trends and more disciplined fiscal policy. We remain long euro against the US dollar and have taken profits on our Brazilian real exposure.
In conclusion, we continue to believe that cyclical risks are contained but recognise that valuations are challenging and political risk is heightened. We are managing these risks by combining a long position in equities (with diversifying exposures to Value) with gold and short positions US Treasuries and the US dollar.
🟢 Long / positive
🟡 Neutral
🔴 Short / negative
🔼 Up from last month
🔽 Down from last month
Main Asset Classes
🟢 Equities
We remain positive on equities, which are supported by strong earnings momentum, especially in the US. However, risks remain around valuations, geopolitics, and the sustainability of gains beyond technology and AI leaders.
🔴 Government bonds
We maintain a negative view. Significant rate cuts are already priced into the front end of the US yield curve, which could be premature given resilient growth and a strong consumer.
🟡🔽 Commodities
Tight supply in metals and energy markets, together with supportive oil prices, provides the backdrop for further price appreciation. However, the impact of geopolitics has been difficult to predict, so we have downgraded to neutral overall.
🟡Corporate bonds (credit)
We maintain a neutral view on credit. While valuations are elevated and leave little room for error, the macro backdrop remains generally supportive, with steady growth and moderating inflation.
Equities
🟢 US
We remain positive as the equilibrium of the low hiring, low firing environment has stabilised the labour market. US economic data also suggests that, for now, consumers remain resilient.
🟡 UK
The appeal of UK equities has declined as the historically cheap levels that previously underpinned the market have faded, leaving us neutral overall.
🟡 Europe ex UK
Returns have recently broadened out beyond large-cap names, and earnings revisions appear to be bottoming. However, Europe remains a relatively defensive market, so we remain neutral.
🟡 Japan
While the new government's pro-growth agenda is compelling, the recent run-up in prices warrants patience, meaning we prefer to stay neutral.
🟡 Global Emerging Markets (EM)1
Even though valuations are still favourable, and we favour Korea and Taiwan, we remain neutral as our view on China is more sanguine.
🟡 Asia ex-Japan: China
Despite a lower inflation forecast and healthy export sector, a subdued domestic sector keeps us neutral.
🟡 EM Asia ex China
Taiwan and South Korea continue to benefit from structural demand for semi-conductors and AI infrastructure, though we remain cautious due to tariff and policy uncertainties.
1Global Emerging Markets includes Central and Eastern Europe, Latin America, and Asia.
Government bonds
🔴 US
We maintain a negative view amid concerns about US fiscal spending and sustainability.
🟡🔽 UK
The UK budget did not present any major concerns; however, increasing political risks in the UK have prompted us to downgrade gilts to neutral.
🟡🔼 Europe
We have upgraded our view on Bunds to neutral. Our concerns around fiscal expansion have largely been priced in and are now reflected in current valuations.
🟡 Japan
We are neutral on Japanese government bonds, as fiscal expansion and a hawkish Bank of Japan may drive real (inflation-adjusted) yields higher.
🟡 US inflation-linked bonds
While there are some upside risks to inflation in 2026, mixed technical signals and current valuations lead us to remain neutral for now.
🟢🔼 Emerging markets local currency bonds
We have upgraded our view on EM local debt to positive. A weaker US dollar and improving fundamentals should support EM local returns.
Investment grade credit
🟡US
We remain neutral on the sector, as we see limited opportunity. Tight valuations leave little room for upside in an environment of M&A activity and AI-related capital expenditure.
🟡 Europe
We continue to prefer Europe over the US. Although valuations are similarly expensive, strong bank fundamentals and financials are supportive, leaving us neutral overall.
🟡 Emerging markets USD
We remain neutral. Emerging market investment grade offers a spread pickup over US credit, with lower leverage and duration. However, valuations remain tight.
High yield bonds (non-investment grade)
🟡US
Valuations remain extremely expensive, with little scope for spreads to tighten. However, company balance sheets are healthy leaving us neutral overall.
🟡 Europe
We retain our neutral stance. Although hedged yields and the economic backdrop are supportive, we continue to prefer exposure to other risk assets for now.
Commodities
🟢 Energy
We remain positive but cautious, given ongoing supply pressures from low prices. We see the sector as a potential hedge, alongside gold, against ongoing geopolitical events.
🟢 Gold
We remain positive on gold, as it provides valuable diversification amid ongoing geopolitical uncertainty. Continued central bank demand continues to be a key driver of demand.
🟡🔽 Industrial metals
The sharp, speculative rally in industrial metals such as nickel leaves the market vulnerable to a reversal. Given the speed of the rally, we have taken profit as caution is warranted in the near term.
🟡 Agriculture
Supply remains healthy and there are few notable risks at present. Meanwhile, the market remains short, leaving us neutral overall.
Currencies
🔴US $
We remain negative, as the structural drivers of USD weakness remain intact. Institutional credibility has eroded, whilst fiscal deficits continue to widen.
🟡 UK £
While sterling may benefit from a weaker US dollar, the weakening economic outlook, fiscal consolidation and dovish risks to BoE rate pricing, keep us neutral.
🟢EU €
We remain positive on the euro, supported by the reduced concerns over downside risks to growth in the eurozone. An expected pause on interest rates from the European Central Bank suggests further stability.
🟡 CNH ¥
Although China has seen lower inflation, which should be supportive for the currency outlook, we prefer to maintain currency exposure elsewhere and hence remain neutral.
🟡 JPY ¥
We maintain a neutral stance on the Japanese yen. Fiscal expansion and cautious Bank of Japan policy is expected to limit near-term currency moves.
🟡Swiss franc ₣
We remain neutral on the Swiss Franc.
Source: Schroders, January 2026. The views for equities, government bonds and commodities are based on return relative to cash in local currency. The views for corporate bonds and high yield are based on credit spreads (i.e., duration-hedged). The views for currencies are relative to the US dollar, apart from the US dollar which is relative to a trade-weighted basket.
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