What will the investment landscape look like next year?

Goldman Sachs Asset Management is out with its investment outlook for 2026(pdf), giving us our first look into next year’s investment landscape and potential market catalysts. The asset manager sees the possibility of easing fiscal cycles, continued significant investment in artificial intelligence, and a rebound in M&A momentum as key trends that could drive portfolio value growth next year.

(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

Setting the scene: Next year is expected to be shaped by central bank actions, trade stability, fiscal deficits, continued geopolitical tensions, credit risks in the banking sector, and high market concentration.

BREAKING DOWN THE TRENDS-

#1- Rate cuts topped the list of trends likely to drive portfolio growth next year. “We believe easing cycles present opportunities across asset classes,” the asset manager said. “Rate cuts could benefit fixed income, including front-end US Treasuries, and investment-grade credit, where the rate component of yields is higher than in the past, meaning total returns benefit from falling rates.”

Closer to home: The Fed moving forward with rate cuts sets the stage for merging markets to slash rates without having to worry about currency weakness.

#2- The asset manager sees capital expenditure spending on AI by US tech giants “remaining durable” next year. The report notes that industry experts have repeatedly underestimated AI capex over the past couple of years. While initial public market excitement around generative AI focused on a limited set of stocks, Goldman Sachs’ asset management arm expects investment potential to expand into other emerging companies.

The fine print: While AI capex is one of the big drivers that can accelerate growth and unlock value within investment portfolios, the report notes that “return on investment visibility” in AI companies is still limited, and that there is a need for a “rigorous analysis of business fundamentals” of these entities.

#3- It also expects the recovery of dealmaking that was seen this year to continue into next year, referring to the increase in M&A activity in the US and Europe. This uptick is expected to drive a broader revival in private equity activity and boost demand for private credit financing. A rise in M&A activity may also attract more attention to smaller companies, “which form the backbone of activity.”

Other factors that could spur markets: The outlook also highlighted US tax cuts and deregulation, economic security, and global power demand — driven by AI and non-AI data demand — as trends that could drive growth in investment portfolios.

MARKETS THIS MORNING-

Asian markets are inching higher this morning, with South Korea’s Kospi leading gains, up 1.1% in early trading. The Hang Seng, Shanghai Composite, and Nikkei are trailing behind.

THE CLOSING BELL-

The EGX30 fell 1.8% at yesterday’s close on turnover of EGP 8.4 bn (1.4% below the 90-day average). International investors were the sole net sellers. The index is up 33.6% YTD.

In the green: Qalaa Holdings (+5.1%), TMG Holding (+3.1%), and EFG Holding (+2.6%).

In the red: Ibnsina Pharma (-2.9%), Orascom Construction (-2.2%), and Orascom Development (-2.1%).

CORPORATE ACTIONS-

SODIC’s general assembly greenlit a EGP 2.9 bn financial leasing agreement with EFG Finance’s EFG Corp-Solutions, according to a disclosure to the EGX (pdf). The agreement covers the sale-and-leaseback of all land, buildings, and constructions of Building 1 in The Polygon business park in SODIC’s Westown project in Sheikh Zayed.