Nannette Hechler-Fayd’herbe, Head of Investment Strategy, Sustainability and Research, Lombard Odier:

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With 17 percent annual volatility in global equity indices, investors must expect periodic drawdowns, especially in markets where valuations are very high – such as the U.S. and the UK.

More important, however, is what the broader macro and market backdrop implies for equities in 2026. First, global growth is expected to be unspectacular but positive, without recession. Second, the Federal Reserve needs to catch up on rate cuts, ensuring continued liquidity support for financial assets. As such, setbacks should generally be viewed as buying opportunities, and equities overall are likely to trade higher in 2026.

«Setbacks should generally be viewed as buying opportunities, and equities overall are likely to trade higher in 2026.»

The outlook is strongest for regions and sectors that lagged in 2025 and do not show excessive valuations, such as Swiss equities or healthcare. Japanese equities and emerging markets also look positive.

Dividend-paying equities remain reliable portfolio anchors. Bond returns are expected to be modest: credit spreads are tight and government bond yields are likely to rise only slightly, if at all.

Risk-reward remains most attractive in emerging market bonds. Commodities also play a role in diversified portfolios and should benefit from strong demand combined with supply bottlenecks.

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