What are the risks for investors in 2026?
Investment trust managers comment on what keeps them awake at night.
Though investment trust managers remain optimistic, they see a number of potential headwinds ahead next year.
The annual fund manager poll by the Association of Investment Companies (AIC) found that 48% of managers believed global stock markets would rise in 2026, with only half that number (24%) saying they would fall. But the biggest risk, cited by 33% of respondents, was a stock market bubble, with inflation, recession, US trade tariffs and a weakening of the global economy also causing concern.
A third of our managers are worried about a potential stock market bubble, even though about half of them still see global markets continuing to rise next year. Since no-one knows what the future holds, it’s important to stay focused on your financial goals and maintain a diversified portfolio as we head into 2026.
Nick Britton, Research Director of the Association of Investment Companies (AIC)
Nick Britton, Research Director of the Association of Investment Companies (AIC), said: “The high concentration of the US and global stock markets in a small number of names is certainly giving investment trust managers pause for thought. A third of our managers are worried about a potential stock market bubble, even though about half of them still see global markets continuing to rise next year. Since no-one knows what the future holds, it’s important to stay focused on your financial goals and maintain a diversified portfolio as we head into 2026.”
The AIC has collated comments from investment trust managers about the main risks they see in markets at the moment.
Martin Connaghan, Senior Investment Director of Murray International Trust, said: “It’s been another noisy year for market participants and 2026 is likely to be more of the same. Global equity markets are navigating a challenging backdrop marked by elevated valuations, a slowing global economy, ever increasing levels of government debt, possible signs of labour market weakness in key regions, and persistent geopolitical uncertainty. These headwinds contrast with a solid – though arguably narrow – earnings profile and a potentially supportive monetary policy environment. One shouldn't point to elevated multiples or market concentration and say that markets should correct, but at the same time, we must be mindful that when markets are concentrated and expectations are high, the margin for error is small, and gravity can be a considerable force.”
Omar Negyal, Portfolio Manager of JPMorgan Global Emerging Markets Income Trust, said: “The biggest challenge on the horizon remains US trade policy. Tariffs continue to unsettle global supply chains and could dent export-led growth in some markets. Meanwhile, investor sentiment in China and tech could prove fickle; after a rapid rebound, expectations may have run ahead of reality.
“Beyond that, geopolitics, elections and the path of the US dollar will all shape the year ahead. But while risks remain, we see many emerging economies in far better fiscal health than before. For us, volatility isn’t a reason to retreat – it’s a chance to find the next wave of long-term winners.”
Paul Green, Co-Portfolio Manager of CT Global Managed Portfolio Trust, said: “While our view on risk assets remains constructive, as ever there are downside risks to consider. Market expectations for interest rate cuts may be wide of the mark should inflation remain sticky above targets. Economic growth looks reasonable, but we note the reliance in the US on continued capital expenditure on AI related buildout and that some parts of the economy appear to be in far weaker shape. Earnings growth assumptions are positive but could be derailed by weaker growth. Political uncertainty remains high, both on a domestic and international level, and we are yet to see the full impact of US tariffs on the global economy.”
Charles Jillings, Co-Portfolio Manager of Utilico Emerging Markets Trust, said: “There are two potential risks for 2026. First, a material slowdown in global growth. A weaker US economy would result in a fall in consumption, which would impact export-driven economies and markets, which in turn would impact commodity driven countries due to less demand for resources. Second, a material increase in geopolitical tension could result in a sudden increase in oil prices, which would result in short-term inflationary pressures and place financial stress on energy importing economies.”
Jack Featherby, Portfolio Manager of JPMorgan European Discovery Trust, said: “While we see plenty of reasons to be positive, the most immediate risk is political uncertainty, particularly around US trade and tariff policy which has created ripple effects across global markets.
“The energy transition and defence policy shifts in Europe could also create winners and losers, and there’s a possibility that renewed inflation could test central banks. But with a portfolio anchored in nimble, domestically focused businesses, we’re well placed to ride out volatility. In fact, we think these same geopolitical shocks could spark a new investment cycle for Europe – one that plays straight into the strengths of small cap companies.”
Felise Agranoff, Portfolio Manager of JPMorgan American Investment Trust, said: “US equity valuations remain high, which leaves markets more sensitive to disappointment. If earnings don’t keep pace or geopolitical tensions rise, we could see some further volatility. Investors have enjoyed strong returns for years, so it’s natural to expect a few bumps along the way.
“That’s why we stay focused on fundamentals: owning businesses with solid cashflows, good management and durable demand. It’s these qualities that allow companies to ride out uncertainty and keep delivering for shareholders over time.”
Ollie Kenyon, Senior Director of RTW Investments which manages RTW Biotech Opportunities, said: “Political and regulatory volatility remains the most significant risk for 2026. Confidence around tariffs, drug pricing, and FDA policy is critical for sector stability. Any resurgence of uncertainty in these areas could weigh on valuations and deal activity.”
Jon Brachle, Portfolio Manager of JPMorgan US Smaller Companies Investment Trust, said: “Persistent inflation, high borrowing costs and uneven industrial demand remain challenges, particularly for smaller US businesses. Still, periods of small cap underperformance are nothing new and history shows they’re often followed by strong rebounds. By staying focused on quality companies with solid balance sheets and diversified revenue streams, we aim to capture that next wave of opportunity when it comes.”
- ENDS -
Follow us on X @AICPRESS
Notes to editors
- The Association of Investment Companies (AIC) represents a broad range of investment trusts and VCTs, collectively known as investment companies. The AIC’s vision is for closed-ended investment companies to be understood and considered by every investor. The AIC has 281 members and the industry has total assets of approximately £269 billion.
- For more information about the AIC and investment trusts, visit the AIC’s website.
- Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all.
- To stop receiving AIC press releases, please contact the communications team.
