The world of investing is undergoing a profound transformation, with global equity markets poised for significant shifts in 2026 and beyond.

Investors must navigate this evolving terrain by understanding new opportunities and risks across diverse regions.

Projected to return 11% with dividends, global equities offer a compelling outlook, driven by fundamental changes rather than fleeting trends.

This article explores the key factors shaping this landscape, from economic forecasts to geographic diversification, providing practical insights for building resilient portfolios.

Global Economic Backdrop and Equity Forecasts

The foundation for equity performance in 2026 is set by a robust global economy.

Goldman Sachs Research economists expect sturdy global growth of 2.8%, outpacing consensus forecasts and supporting corporate earnings.

This expansion is widespread, with all regions contributing to the upward momentum.

The US Federal Reserve is forecast to provide further modest easing, which could lower borrowing costs and stimulate investment.

This environment fosters above-trend growth and accelerating productivity, creating a fertile ground for equity gains.

However, valuations are at historically high levels, suggesting that returns will be more earnings-driven than valuation-based.

Key factors influencing this outlook include:

• Continued economic expansion across developed and emerging markets.
• Policy easing measures by central banks to support growth.
• Corporate profitability improvements driven by efficiency gains.

This sets the stage for a bull market continuation, albeit with tempered gains compared to previous years.

The 2025 Turning Point: A Shift in Geographic Performance

2025 marked a pivotal moment in global equity markets.

For the first time in nearly 15 years, equities outside the US outperformed, rewarding investors who diversified geographically.

The US underperformed major markets as the dollar declined, highlighting the importance of looking beyond traditional hubs.

On a country returns ranking, the US placed #20, with South Korea and Spain leading the pack.

This shift underscores a broader trend toward more balanced global performance.

The gap in growth-adjusted valuations between US equities and the rest of the world has narrowed.

Investors should note this change and adjust their strategies accordingly.

Top-performing regions in 2025 included:

• South Korea, driven by strong AI-related stocks.
• Spain, benefiting from economic resilience.
• Emerging markets as a whole, with significant gains.

This diversification was rewarded, offering lessons for future portfolio construction.

Emerging Markets: The New Frontier for Growth

Emerging markets equities have emerged as a powerhouse, with the MSCI EM Index up more than 30% in 2025.

Doubled the performance of the S&P 500, EM equities offer attractive opportunities due to several key drivers.

China's advancements in AI, particularly with DeepSeek, show it is not lagging in the technology race.

Strong AI-related stocks in Korea and Taiwan have fueled regional gains.

Policy easing and a weaker US dollar have reduced borrowing costs and spurred economic activity.

EM equities are positioned for robust performance in 2026, supported by lower local interest rates and higher earnings growth.

Key opportunities exist across various regions, including India, China, and Latin America.

Drivers of EM equity strength include:

• AI infrastructure investment boosting productivity.
• Weaker US dollar reducing financial stress for borrowers.
• Strong demographics and rising domestic consumption.

This makes EM a critical component for diversified portfolios.

Investment Themes for 2026: AI and Diversification

Artificial intelligence remains a high conviction theme, driving above-trend earnings growth.

The AI supercycle is expected to fuel earnings growth of 13–15% for the S&P 500 over the next two years.

Despite some market trepidation, AI capital expenditures are likely to be underwritten as technology proves its worth.

Diversification should continue to offer better risk-adjusted returns, with growth-adjusted valuation ratios converging.

Investors should seek broad geographic exposure, including increased focus on emerging markets.

A mix of growth and value stocks across sectors is essential for balanced returns.

Opportunities for stock picking arise as markets move less in lockstep.

Key investment strategies include:

• Exposure to AI-related semiconductor demand in Korea and Taiwan.
• Investing in companies with AI supply chain exposure across emerging markets.
• Incorporating income sources from EM debt and dividend stocks.

This requires new portfolio construction tools to navigate the evolving landscape.

Risk Factors and Portfolio Strategy

While the outlook is positive, several risk factors must be considered.

Market saturation and concentration pose challenges, with global portfolios heavily weighted in US mega-caps.

A winner-takes-all dynamic could limit opportunities for broader market participation.

It would be unusual to see a significant equity setback without a recession, but elevated valuations warrant caution.

Markets have priced in much anticipated good news, suggesting additional upside may be limited.

For EM equities, earnings growth must deliver to sustain long-term rallies.

Potential headwinds include:

• Sector breadth challenges in emerging markets.
• Geopolitical surprises that could disrupt global trade.
• Uneven earnings revisions across regions.

To mitigate risks, investors should adopt a balanced approach, focusing on fundamentals and diversification.

This table summarizes key data points to guide investment decisions.

In conclusion, the shifting landscape of global equities demands proactive strategies.

By embracing diversification and focusing on emerging markets, investors can capitalize on growth opportunities.

Staying informed about economic trends and risk factors will be crucial for success in 2026 and beyond.