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.

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.

ADX

9,772

-0.2% (YTD: +3.8%)

DFM

5,831

-0.1% (YTD: +13.0%)

Nasdaq Dubai UAE20

4,620

-0.3% (YTD: +11.0%)

USD : AED CBUAE

Buy 3.67

Sell 3.67

EIBOR

3.8% o/n

3.6% 1 yr

Tadawul

10,852

-1.4% (YTD: -9.8%)

EGX30

39,725

-1.8% (YTD: +33.6%)

S&P 500

6,705

+1.6% (YTD: +14.0%)

FTSE 100

9,535

-0.1% (YTD: +16.7%)

Euro Stoxx 50

5,529

+0.3% (YTD: +12.9%)

Brent crude

USD 63.37

+1.3%

Natural gas (Nymex)

USD 4.52

-0.8%

Gold

USD 4,168

+0.9%

BTC

USD 88,292

+1.7% (YTD: -5.6%)

Chimera JP Morgan UAE Bond UCITS ETF

AED 3.77

0.0% (YTD: +8.2%)

S&P MENA Bond & Sukuk

152.18

+0.1% (YTD: +8.8%)

VIX (Volatility Index)

20.52

-12.4% (YTD: +19.0%)

THE CLOSING BELL-

The DFM fell 0.1% yesterday on turnover of AED 825.4 mn. The index is up 13.0% YTD.

In the green: Dubai Residential REIT (+4.1%), Al Salam Sudan (+3.1%) and Commercial Bank of Dubai (+2.7%).

In the red: National Central Cooling Co (-3.8%), Chimera S&P UAE Shariah ETF- Share class B – Income (-3.2%) and Amlak Finance (-2.4%).

Over on the ADX, the index fell 0.2% on turnover of AED 2.8 bn. Meanwhile, Nasdaq Dubai was down 0.3%.

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