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The Investment Outlook

House 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

Aberdeen Investments House View August 2026

Part 2 of

The Investment Outlook

Duration: 2 Mins

Date: Aug 17, 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.

For more details on the latest House View see below:

Table 1. Aberdeen House View August 2026

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 characterized 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.

The US dollar

A 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 characterized by energy disruption, geopolitical uncertainty and periodic risk aversion, we believe 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 defense spending, energy system investment and large global infrastructure funding gaps. The focus remains on small- and mid-capitalization 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.

Final thoughts

We continue to favor staying invested while recognizing 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.

Important information

Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or results may differ materially.
Past performance is not an indication of future results.
Diversification does not ensure a profit or protect against a loss in a declining market.
Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks are enhanced in emerging markets countries.
Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), call (some bonds allow the issuer to call a bond for redemption before it matures), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).
Products investing in infrastructure are subject to the risk of concentrating investments in infrastructure-related companies, which makes them more susceptible to factors adversely affecting issuers within that industry than would a product investing in a more diversified portfolio of securities. These risks include high interest costs in connection with capital construction programs and the costs associated with environmental and other regulations.
Alternative investments involve specific risks that may be greater than those associated with traditional investments; are not suitable for all clients; and intended for experienced and sophisticated investors who meet specific suitability requirements and are willing to bear the high economic risks of the investment. Investments of this type may engage in speculative investment practices; carry additional risk of loss, including possibility of partial or total loss of invested capital, due to the nature and volatility of the underlying investments; and are generally considered to be illiquid due to restrictive repurchase procedures. These investments may also involve different regulatory and reporting requirements, complex tax structures, and delays in distributing important tax information.

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