Jason Todd
As the global economy balances optimism and risk, Ten Cap is approaching 2026 with confidence, noting underlying fragility remains due to lingering tariff concerns and rising imbalances as a result of the impact of artificial intelligence (AI) and technology.
Jason Todd, founder and CEO, says overall Ten Cap holds a glass half full view where economic growth consolidates around trend, before picking up deep into 2026 / early 2027 as the drags of the first half of the year diminish.
He says fears of an AI bubble and an unwind are overplayed, as AI-driven capital expenditure will reshape growth.
“At this stage, we see no accelerants that would turn selected weakness into systemic concerns for the US or the global economy.
“Continued investment in AI and technology will boost corporate capital expenditure, offsetting weaknesses in the US labour market and supporting global expansion,” he says.
But he says markets will see a patchwork recovery, rather than a synchronised boom.
“We expect advanced economies to slow, and emerging markets to see minor upside. But the recovery will be uneven and regionally divergent.
“Unlike many, we don’t see China disappointing, although neither do we see the potential for policy support to drive (sequentially) higher growth.”
He says central banks will continue to ease cautiously.
“The majority of policy support is already in place, but further rate cuts will continue into 2026. The central banks in the US, Europe, and the UK are likely to cut rates modestly, while Japan normalises slowly.
“China will use targeted fiscal and monetary measures to stabilise growth, as it battles structural drags from the property sector.”
But he says there are economic risks to the upside.
“Expectations for growth have been consistently exceeded through 2025 as trade uncertainty has not translated into meaningfully higher inflation or a supply shock. It has taken most market participants too long to recognise this. We don’t see AI capital expenditure slowing and we think policy support should gradually lift consumer spending and activity levels across developed economies,” says Todd.
Ten Cap’s lead portfolio manager, Jun Bei Liu, says in this environment she expects equities to surprise on the upside.
Solid gains are likely for global equity markets, which Liu says will be led again by the US where the rally will continue to broaden out with high quality tech and growth stocks remaining supportive off the back of a strong earnings outlook.
“We do not think the year will be characterised by the need to be overly defensive or to favour large liquid stocks over small and mid-cap cyclicals.
“A solid economic backdrop, slightly lower policy rates, and a recovering consumer and structural thematic are all positive drivers – offset only by valuation concerns.
“However, liquidity conditions will remain strong, risk-taking behaviour will continue and investors will not chase private markets at the expense of public markets because of value.”
She says it will be another solid year for Australia equities, and she expects the market to outshine dull expectations again.
“Australia’s economy is expected to grow around trend in 2026, supported by solid fundamentals such as steady labour income, strong immigration, and improving global conditions. However, the removal of the RBA’s easing bias will soften momentum, with two rate cuts likely, but not until late 2026.
“Fiscal policy remains supportive but is shifting toward revenue reform, which could introduce volatility for certain sectors.
“We think the Australian market will exceed the current “trend / on the fence” expectations of 7-to-10 per cent, underpinned by an improved earnings outlook and earnings-per-share (EPS) growth of 8-to-10 per cent, as well as a further “re-rating” rather than “de-rating” of price earnings (PE) multiples.
“A broad improvement in domestic macroeconomic conditions, particularly the consumer sector, will keep the equity market well supported even though valuation optics will look expensive.
“We doubt PE multiples will move lower outside of a global shock or a liquidity unwind. Fears of an overvalued market are exaggerated and comparisons to the long term historic average are not relevant.”
She adds growth stocks are a structural part of every portfolio, and she expects growth stocks to perform well into 2026 outside of any higher domestic policy rate increases, which are unlikely.
“We expect cyclical and consumer improvement, which means mid-and-small-caps will have another strong year, outperforming large caps (ex-materials).
“Energy stocks will be the sleeper in 2026,” Liu concludes.
