2025 now in the rearview mirror,
what to expect from the year ahead?

• Policy Support and Liquidity Backstop

Central banks moved to an even more accommodative stance as inflation cooled, easing financial conditions and reducing funding costs. This action buoyed risk assets by compressing yields and maintaining ample liquidity, supporting both credit markets and equities. Investors priced the possibility of continued rate cuts, particularly on the back of pressure from the Trump administration which lifted valuations and helped markets absorb geopolitical and trade-policy shocks without prolonged sell-offs.

 

• Earnings and Growth Fundamentals

Underlying corporate earnings proved more resilient than expected amid concerns about slowing global growth and trade related volatility. Tech and AI-driven sectors delivered strong growth, while cyclical segments showed pockets of stability. Positive revisions in earnings outlooks, particularly in the US and parts of emerging markets, underpinned risk appetite. Improved macro data and a soft-landing narrative helped sustain investor confidence in fundamental valuation support.

 

• Investor Positioning and Diversification 

As investors searched for higher yields and diversification, flows across asset classes towards shorter duration plays and alternative credit, helped tame volatility and support these sectors. Private markets and structured credit gained a lot of traction as yield differentials widened versus traditional fixed income. Cross-asset correlation (or rather decorrelation) remained favorable enough to support risk allocations even amid geopolitical tensions, strengthening particularly private credit markets.

 

As we turn the corner and start 2026, vulnerabilities for the markets in general remain.

• Inflation Uncertainty and limited policy adjustments

Central banks may face a difficult balancing act in 2026 if inflation proves stickier than expected. Long term visibility about the effects of tariff changes is limited. Even a mild increase in price pressures could force a pause or reversal in rate cuts, tightening financial conditions abruptly. This raises risk of repricing across equities and fixed income, particularly where valuations are elevated, and heightens volatility if markets misinterpret the macro trajectory.

 

• Structural & Valuation Vulnerabilities 

Elevated equity and credit valuations, concentration in tech/AI names, high public debt across major economies, and tight credit spreads leave limited downside cushion against shocks. Disappointing AI earnings, property market weakness (especially in China), or a broader repricing of risk assets could expose valuation over-optimism. Credit sectors with stretched fundamentals may widen sharply if sentiment deteriorates, stressing liquidity and risk blowing up premia.

 

• Geopolitical & Trade Risks 

Escalating geopolitical tensions, particularly around US-China relations, rare earths, supply chains, and defense policy, could disrupt markets and investor sentiment. This notwithstanding the ongoing conflict between Russia and Ukraine acting as proxy for EU/US.  Rising protectionism and political uncertainty may reduce cross-border flows, impact commodity pricing, and amplify risk premia here as well. Institutional surveys highlight geopolitical risk as top concern, reinforcing the likelihood that shocks could trigger risk-off repricing episodes.

 

In adversity lies opportunity. What am I initially looking at for 2026?

• AI & Optical Infrastructure

No pure AI play here. The AI sector still has some runway as AI tools continue to be integrated within the broader economy at a very strong pace. The top 5 hyperscalers are planned to expand Capex by 35% in 2026 and in addition we will see incremental investments from the likes of OpenAI (ChatGPT), Anthropic (Claude). As they look to optimize the usage of their infrastructure and connect more processors together to absorb the demand, I believe companies producing optical networking would benefit.

Broadcom (AVGO US) and Marvell (MRVL US)

• Uranium

With global electricity demand increasing and ways to provide clean energy to supply the heavy needs of AI/ data center driven demand still unmatched, nuclear energy has strong tailwinds. Nuclear electricity production is at the forefront for providing electricity suppliers with clean energy. Uranium purchases remain firmly below replacement rate as utility companies are consuming more than they are able to purchase. Structural tightness in the Uranium market is likely persists into 2030.

Sprott Inc. (SII NQ)

• Private Markets & Alternatives (Private Credit/Infra)

Private markets remain a strategic allocation as traditional yields compress. Institutional forecasts highlight opportunities in private credit, infrastructure, real estate and other alternatives for enhanced income and diversification. Private credit’s contractual yields and infrastructure’s inflation-linked cash flows can outperform in a more moderate growth, lower-rate environment, making them well-suited to 2026’s.

Stewards Private Credit Fund ( STPCAHP MP, STPCBAX MP)