Insights
Multi-assetHouse View: staying invested, but increasing diversification as risks multiply
Resilient growth and continued enthusiasm around artificial intelligence support risk assets. But rising geopolitical tensions, fiscal pressures and concentrated market leadership strengthen the case for greater diversification.
Author
Paul Diggle
Chief Economist
Part of
The Investment OutlookDuration: 2 Mins
Date: 17 Aug 2026
Our House View remains modestly positive across both developed market and emerging market equities but has become more constructive on the US dollar as a hedge against geopolitical risks.
We have also upgraded the signal on global government bonds as they offer attractive yields, but downgraded corporate credit because the additional yield above government bonds has become very tight.
- Our central expectation is for the Strait of Hormuz to remain effectively closed for multiple weeks, creating occasional upward pressure on oil prices, before economic and political pressures eventually force some form of deal. Thereafter, the conflict may evolve into an on-again, off-again pattern that sees the strait open and close multiple times.
- Either way, recent events reinforce our conviction that geopolitical risks are structurally elevated. Rather than attempting to time these shocks, portfolios should remain exposed to long-term return drivers while maintaining sufficient diversification to absorb market volatility.
- Despite these headwinds, the global expansion remains intact. We forecast global growth of around 3.2% in 2026, supported by artificial intelligence (AI)-related capital expenditure, fiscal easing and fading tariff uncertainty.
- Inflation remains above target in many economies, reflecting both higher energy prices and strong demand for AI-related infrastructure. This has shifted the policy debate from how quickly rates can be cut to whether some central banks may need to tighten further.
- Equities continue to benefit from resilient earnings growth and ongoing enthusiasm around AI. However, concentration risks have increased significantly, making stock and sector selection more important than simply increasing market exposure.
- Attractive government bond yields, a more constructive view on the US dollar, and continued conviction in infrastructure all reinforce the case for diversification as the range of potential economic and market outcomes widens.
Corporate risk: remain constructive, but with greater selectivity
We retain a positive view on equities. Earnings growth remains supportive, economic activity continues to expand, and there is little evidence that AI-related investment is about to collapse.Within developed markets, Japan remains attractive due to corporate reforms and technology exposure, while European equities continue to benefit from relatively attractive valuations. US equities remain supported by earnings fundamentals, although valuation challenges are greater.
Emerging markets also retain a positive signal. We continue to see opportunities from AI-related hardware supply chains and sectors characterised by high asset intensity and lower risks of technological obsolescence.
However, concentration risks have risen significantly, with a small number of AI-related firms accounting for an increasing share of index performance. Selectivity, therefore, matters more than simply increasing exposure.
US dollar: key geopolitical hedge
We have further upgraded our positive view on the US dollar. The principal rationale is diversification rather than outright return potential.In an environment characterised by energy disruption, geopolitical uncertainty and periodic risk aversion, the dollar remains one of the most effective portfolio hedges. It may also benefit from relatively solid US fundamentals and the possibility of a more hawkish Federal Reserve.
That said, the longer-term trend of central banks diversifying away from dollar assets because of questions about US institutional credibility has not disappeared.
Bonds: attractive government bond yields, less value in credit
We have upgraded our view on global government bonds and downgraded corporate credit to neutral.Government bond yields remain attractive relative to recent history, while investors may be overestimating how much additional monetary tightening will ultimately be delivered. Bonds can also continue to play a useful diversification role if geopolitical uncertainty weighs on growth.
However, fiscal deficits, rising debt burdens and concerns around inflation credibility are likely to keep pressure on longer-dated yields. We therefore expect some yield-curve steepening and prefer shorter-dated bonds.
Emerging market local currency bonds remain attractive due to solid fundamentals, negative net issuance and scope for further easing in selected markets. Latin America and frontier markets continue to be preferred to Asia, given their lower vulnerability to energy-price shocks.
Meanwhile, we have downgraded corporate credit to neutral. All-in yields remain appealing, but much of that attractiveness now comes from government bond yields rather than credit spreads, which look tight.
Private markets: infrastructure remains the standout
- Infrastructure remains our highest-conviction private-market exposure. Long-term drivers include rising defence spending, energy system investment and large global infrastructure funding gaps. The focus remains on small- and mid-capitalisation opportunities where valuations appear most attractive.
- Global property also remains positive, supported by healthy tenant demand, limited supply and resilient income characteristics, although uncertainty around inflation and interest rates remains a constraint.
- Private credit remains neutral. Investment-grade segments still offer attractive opportunities, but concerns around underwriting standards and recent fund gatings – restrictions on redemptions – have reduced our conviction in riskier areas of direct lending.
Overall positioning
We continue to favour staying invested while recognising that the range of potential outcomes has widened. In a world where geopolitical volatility, AI disruption and fiscal pressures increasingly shape market outcomes, diversification rather than market timing remains the cornerstone of resilient portfolios.For more details on the latest House View see below:
Aberdeen House View: August 2026
