Invesco is preparing to take on more selective risk across its multi-asset portfolios heading into 2026, as the firm adopts a cautiously constructive view on global markets despite muted economic growth and ongoing geopolitical uncertainty.
David Aulja, multi-asset fund manager at Invesco, said the backdrop is improving, with easing inflation, stabilising supply chains and early signs that central banks may shift toward policy loosening.
“We view this market backdrop as relatively constructive and anticipate modest positive returns across risk assets over the coming months and quarters,” he said.
Global growth is projected to ease slightly below 3%, with the sharpest slowdown expected in the US as elevated long-term interest rates dampen consumption and policy uncertainty weighs on sentiment.
Labour market conditions have softened, though Aulja said the low-growth environment lacks the negative momentum, tightening credit conditions and deteriorating sentiment typically associated with recession.
Instead, the structural tech super-cycle, renewed fiscal stimulus, modest monetary easing and reduced trade tensions should offset weakness in manufacturing, housing and employment.
Inflation remains above target but continues to edge lower as supply chains normalise and tighter policy cools demand.
2026 global equity outlook: The year diversification works gain
Aulja expects this positive momentum to continue into 2026, with most G20 economies projected to reach central bank targets.
Upside risks persist, particularly in the US where new tariffs could lift core inflation and revive stagflation concerns. He anticipates a gradual shift toward policy easing, led by the Federal Reserve, assuming no major shocks.
Geopolitical risks remain, though tensions appear to have passed their peak. Aulja said ongoing structural disputes may still fuel concerns around inflation and supply chains.
With indicators aligning to the “recovery” stage of the cycle, Invesco is selectively increasing overall portfolio risk, favouring an overweight to equities relative to fixed income.
Within equities, the firm holds a neutral stance between US and developed ex-US markets.
US earnings momentum continues to outperform, while a bearish view on the dollar is seen as a strong tailwind for international unhedged exposures.
In fixed income, Invesco has increased credit risk to a moderate overweight, though spreads near historic lows limit the case for riskier credit.
The firm favours emerging market local debt given its bearish dollar outlook.
