02 Oct 2026
AI remains a powerful theme, but market leadership is evolving. Portfolio Managers Chris Forgan and Caroline Shaw discuss how we're positioning portfolios to capture a broader range of opportunities across global markets.
Artificial intelligence (AI) is a theme that has dominated global equity markets over recent times. The scale of investment in AI infrastructure, data centres, semiconductors and related technologies has resulted in both exceptional earnings growth and returns for investors. What’s more, AI is likely to be a market theme for a while yet – AI-related earnings remain strong, and capex continues to provide good visibility over future demand. However, from a portfolio perspective, this causes a concern about concentration even if the underlying investment case remains robust.
It is therefore encouraging that earnings growth is beginning to broaden, with more sectors and companies benefiting from a resilient economic backdrop. This creates an opportunity to broaden our portfolios, although it’s important to state we retain exposure to technology across our range.
Market performance has been unusually dependent on a relatively narrow group of companies. We have seen this in the US, but also in parts of Asia where a handful of semiconductor businesses have driven a significant proportion of emerging market returns. Given this backdrop, we have been looking to identify areas that can participate in a broader expansion of market leadership while reducing reliance on the dominant AI-related trade.
One such opportunity is Europe, and specifically the Euro Stoxx 50 index. It offers exposure to Europe’s large multinational companies, while also capturing key sectors that are well positioned to benefit from increased government spending initiatives.
Financials offer strong earnings growth, supported by improving net interest margins as borrowing costs remain elevated. In addition, aerospace and defence remain strategic priorities for both European governments and NATO members. Industrials also represent a meaningful allocation within the index, much more so than for the US large-cap market.
Within the US, we have increased portfolio breadth through exposure to the S&P 500 Equal Weight index. This provides greater exposure to areas outside mega-cap technology. If corporate earnings continue to broaden and/or the positive AI narrative is challenged, these areas of the market should be well placed to benefit.
Emerging markets remain one of our higher-conviction opportunities – valuations are attractive and the potential for a weaker US dollar should be a support over the medium term. However, concentration risk has increased here too given the spectacular performance of tech companies in Korea and Taiwan. As a result, we continue to be selective. India is an attractive long-term structural growth story while there are opportunities to be found in China and Latin America. Brazil, for example, combines relatively attractive valuations with falling domestic interest rates and benefits from significant commodity exposure. As such, these markets offer diversification away from the semiconductor-heavy parts of Asia.
Our thinking extends beyond equities and we seek to broaden our sources of return across asset classes. Our exposure to commodities, for example, includes industrial metals. These are well placed to benefit from an improvement in global manufacturing as well as longer-term demand from electrification and AI infrastructure. We hold gold as a strategic diversifier, particularly given continued concerns around geopolitics, inflation and US debt.
Alternative strategies also have a place in our portfolios. We believe their ability to generate returns from different market drivers is particularly valuable when traditional relationships between equities and bonds are less reliable and so we remain positive on this area.
By contrast, with credit spreads offering limited compensation for risk, our conviction in broad fixed income remains relatively low. What’s more, uncertainty around inflation and government borrowing makes us cautious about taking excessive duration. As such, we favour flexible active managers and shorter-duration exposure alongside alternatives rather than relying heavily on traditional bond markets.
So, breadth is the common theme running through our portfolios. We still want to retain exposure to the structural themes that have delivered strong growth, particularly AI, but we do not want portfolio outcomes to be excessively dependent on them. Markets leadership changes over time – if earnings growth continues to spread across the US economy and into previously unloved sectors, the next phase of this cycle could look considerably broader than the last.
We view this as an opportunity rather than a reason to become defensive. We remain positive on risk assets – we just want that risk distributed across a wider range of return drivers.
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Important information
This information is for investment professionals only and should not be relied upon by private investors. Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific shares/investments is not a recommendation to buy or sell. The Fidelity Multi Asset funds use financial derivative instruments for investment purposes, which may expose the funds to a higher degree of risk and can cause investments to experience larger than average price fluctuations. The investment policy of these funds and portfolios means they invest mainly in units in collective investment schemes. Changes in currency exchange rates may affect the value of investments in overseas markets. Investments in emerging markets can be more volatile than other more developed markets. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. The price of bonds with a longer lifetime until maturity is generally more sensitive to interest rate movements than those with a shorter lifetime to maturity. The risk of default is based on the issuers ability to make interest payments and to repay the loan at maturity. Default risk may therefore vary between government issuers as well as between different corporate issuers.
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