2026: keeping calm and carrying on

As 2026 gets underway, there are some familiar patterns. The geopolitical noise that characterised 2025 is still very much in evidence. Diversification is a watchword, as investors discover that there is a world beyond US technology. Artificial Intelligence (AI) is still an important trend, that demands a response from investors. Yet the year ahead may also have some notable differences.

2025 was a noisy year. The new tariff regime created significant volatility, and markets could bounce around in response to a single White House tweet. 2026 has started in similar style, with the overthrow of the Venezuelan president, instability in Iran and attacks on US Federal Reserve Chair Jerome Powell.

This ‘noise’ is likely to be an inevitable feature of 2026. For investors, it can be unnerving, but the volatility it creates can be an advantage for the way we invest in Murray International Trust. Last year, the Liberation Day sell off opened up a range of opportunities, with companies that we have been watching, but deemed too expensive, coming down to more attractive valuations. Often, in these scenarios markets will sell and ask questions later. We believe these opportunities will be forthcoming in 2026 as well.

There is plenty of speculation on the likely outcome from various US policy initiatives: will they embolden or antagonise China? What is its likely impact on the bond market? Will they revive inflation? It is impossible to predict with any certainty. We choose to focus primarily on the companies in which we invest and ignore the noise. 

Diversification

2025 was the year that investors finally started to look beyond US technology. A weaker dollar was a deterrent for many European investors. It is worth noting that the S&P 500 only delivered 3.9% to Euro-based investors in 2025 because of the Dollar impact. Investors spread their wings into emerging markets, Europe and even into the unloved UK.

This willingness to look at other markets has been a boost for the trust. We are agnostic on where our companies are listed, paying closer attention to where they draw their revenues. Our US weighting is less than half that of the MSCI World index. Many of our top performers over the year were from outside the US, including Samsung Electronics, TSMC, Intesa Sanpaolo, Telefonica Brasil and Vale.

We believe this diversification is likely to continue. Unpredictable policymaking from the US administration, wobbles over the AI trade and better valuations elsewhere are pushing investors to look beyond US markets. In Murray International Trust, we retain a balance of geographic exposure, while ensuring we are exposed to areas of growth in the global economy. 

AI and technology

The AI theme continues to be front of mind for investors. It is possible to find those on both sides of the fence: those who believe it is over-valued and at risk of a meltdown, and those who believe it is a paradigm shift for the global economy. It is worth noting that even if it is a paradigm shift, it may not justify the inflated valuations in some parts of the US market.

We have the luxury of not having to have positions in the highest value stocks but can take each case on its merits. We have had exposure to some of the ‘nuts and bolts’ of the AI revolution through companies such as Broadcom. To our mind, it was better to be exposed to those companies in receipt of AI spending, rather than those spending it.

However, more recently, we have been paring back our technology exposure. These companies have done very well, and continue to report significant demand. That said, their valuations are so elevated that the slightest dent in the outlook can prompt significant declines in their share prices. The market is often looking for an excuse to take profits. We believe this pattern will continue in the year ahead.

A changing world

We see a continuation of the move away from globalisation in the year ahead, as countries prioritise their own national agenda over collaboration. The open and free trade that has characterised much of the past three decades does not feel as if it is coming back. This is likely to create more cyclicality – a return to conventional inflation, interest rates and economic cycles. 

For companies, that may mean profitability will ebb and flow. This is perhaps a more natural environment and for us, it is an environment that we can navigate effectively. It is important to be disciplined and not get caught up in the enthusiasm or pessimism around certain sectors that may or may not benefit from the latest White House tweet. We hold no defence companies for example. While we recognise that there may be an opportunity from increased defence spending, these companies tend to be inconsistent and lower quality.

The companies that we hold are generally optimistic about their prospects and we are comfortable with their valuations. Pharmaceuticals have been in the doldrums on worries over pricing but have started to revive. We hold companies such as AbbVie. We see a stronger capital expenditure cycle feeding through into industrials. We have increased our weighting in elevator group Kone to participate. We also see some value in certain consumer stocks, buying US home improvement group Lowe’s and Spanish clothing giant Inditex.

2026 is likely to share many of the characteristics of 2025, and there are plenty of reasons to be positive on the outlook as interest rates decline and fiscal stimulus continues. However, as always, we are highly selective on the risks we take with our investors’ capital, and we will maintain our forensic focus on the characteristics of individual companies rather than noisy geopolitics in the year ahead.

Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.

Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG. The company is authorised and regulated by the Financial Conduct Authority in the UK.

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