In 2026, Risky Assets Could Outperform as AI Boom Reshapes Markets

Lucknow: As global markets steer forward in 2026, risky assets are poised for a stronger performance, driven largely by the accelerating artificial intelligence (AI) boom and supported by easing monetary and fiscal conditions, according to a new analysis by Standard Chartered Bank. The report suggests that investors willing to embrace calculated risk could benefit from AI-led growth, though it cautions that market gains are likely to be uneven across asset classes.

“We expect risky assets to outperform in 2026 amid an AI boom, easing fiscal and monetary policies and abating trade tensions,” the report stated. At the same time, it warned that returns may be more dispersed than usual, making diversification across asset types increasingly important.

The analysis outlined three major investment themes expected to define 2026. The first focuses on equities under the banner of “inflating markets, inflating AI debate.” Despite elevated valuations, Standard Chartered believes AI-driven earnings growth will be strong enough to sustain a positive outlook for stocks. Markets are expected to trend higher throughout the year, with the United States and Asia—excluding Japan—leading equity performance.

However, the report acknowledged persistent concerns around valuation risks, particularly in technology-heavy markets. As a result, investors are advised to avoid concentration and instead diversify equity exposure across regions and sectors to mitigate potential volatility.

The second major theme centers on income generation, with emerging market (EM) bonds expected to outperform their developed market (DM) counterparts. According to the analysis, EM bonds—both in local currencies and US dollars—offer attractive yields and valuable diversification away from a Federal Reserve–centric investment approach. Standard Chartered placed a high allocation on EM bonds, highlighting them as a dependable source of income, especially when combined with equity income assets within a multi-asset strategy.

The third theme, described as “chasing glitter,” emphasizes the importance of diversifiers in a changing global financial landscape. The report expects continued demand for alternative currencies such as the Chinese yuan (CNH) and the Japanese yen (JPY), as well as sustained strength in gold prices through 2026. The analysis noted that investors and central banks alike are still seeking alternatives to the US dollar, a structural trend that shows little sign of reversing.

Despite the constructive outlook, the report flagged several key risks that could disrupt markets. These include an unexpected shift in US Federal Reserve policy, a more hawkish stance from the Bank of Japan, the possibility of a contagious credit event, and potential disappointment if AI-driven growth fails to meet lofty expectations.

Market sentiment remains divided. Pessimists warn of bubble-like valuations, persistent inflation, and rising bond yields, while optimists argue that equities are still in a bull market, fueled by strong AI-led profit growth and supportive policy environments.