Eric Marais

Orbis Investments is challenging investors to test their assumptions and re-examine market ‘certainties’ in its new report, Six Courageous Questions for 2026.

In the report, the contrarian global equity manager with A$72billion in assets under management explores some of the powerful narratives shaping markets – from US concentration and the economics of AI to the vulnerability of the US dollar. These questions help investors test where conviction still holds – and where it needs rethinking.

Eric Marais, Head of Investment Specialists, Orbis Investments, said, “Change has accelerated, and it’s reshaping the investment landscape. In this environment, success will require the courage to test assumptions, act when opportunities arise, and the discipline to be selective.”

The key takeaways from the report are that investors should aim for genuine diversification, be valuation-disciplined, and rebalance their portfolios for resilience.

“For Orbis, that means looking at neglected areas of the market, such as opportunities in the healthcare sector, US companies left behind in the AI boom, and emerging markets,” said Marais.

“Success isn’t about having all the answers – it’s about asking the important questions. We would encourage investors to use these questions to test their assumptions and act with discipline and conviction in 2026.”

The six key questions are:

What if exceptionalism is now behind the US’s biggest stocks?

Investors are paying 34 times earnings for mega-cap technology companies, which represent the most crowded part of the market. Orbis views this combination of extreme concentration risk and valuation risk as dangerous, leaving little room for error if fundamentals fail to keep pace with expectations.

History suggests that when market leadership becomes this narrow, opportunity for investors often shifts elsewhere. Investors need to question whether the next chapter of US exceptionalism may be written not by the country’s biggest companies but by the rest of the market they have overshadowed.

Is the world’s safest currency the riskiest?

The US dollar’s haven status is under stress; its yield advantage may fade if the US Federal Reserve cuts rates too soon or fiscal pressures lead to financial repression. Rising debt, persistent deficits and a greater tolerance for inflation also point to a weaker long-term backdrop for the currency.

Investors should consider whether they may benefit from building a balanced portfolio of alternative currencies with compelling characteristics, such as the Australian dollar, Japanese yen, and Norwegian krone.

Are you swimming in the right water?

With US policy turning inward, other export-led economies must adapt. This is likely to lead to domestic investment and fiscal expansion in countries throughout Asia and Northern Europe.  These developments have significant implications for investors with portfolios heavily concentrated in US assets and will reshape the capital cycle. This potentially marks a new era for markets outside the US where

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Eric Marais

Passive and growth strategies have enjoyed remarkable success for many years, but investors have grown too complacent and are not positioned for a changing investment world, according to Orbis Investments.

The contrarian global equity manager with A$59b assets under management has released its “Five considerations for 2025”, informed by analysis of long-term data, which highlights the areas it believes investors should be carefully considering when planning for the year ahead and decade beyond.

Eric Marais, Investment Specialist at Orbis, said, “Throughout 2024, we have seen developments in global markets that amplify concentration, style, and return risks. Many investors continue to structure their portfolios around last year’s winners, but we believe investors should now consider what needs adjusting – most likely their portfolios and their expectations.”

The five considerations are:

1. Periods of great returns historically give way to periods of poor returns    

Investors should be reminded that “periods of great returns historically give way to periods of poor returns – and those returns are poorest when starting valuations are expensive,” said Marais. Placing this into context, in the 10 years leading up to 2021 passive world index investors enjoyed 11% real returns (returns after inflation), yet in the 10-years to 2008 investors lost 2% after inflation.

Given that the last decade delivered phenomenal stock market returns, investors should expect the next decade to be much more challenging.

2. Returns on passive global equity investments could be as low as zero for the next decade 

“While valuations are a poor predictor of short-term returns, they matter a great deal in the long run,” said Marais.
Orbis has reviewed historical valuations dating back to the 1970s, and across a dozen different metrics; the data shows that extreme valuations have been followed by poor subsequent returns. “Our research suggests that passive investors in global equities could expect a return as low as zero, after inflation, in the next decade if historical relationships hold,” Marais said.

3. Indexing is a momentum strategy by stealth  

History has shown that when bubbles burst, the most expensive assets fare badly. At these junctures, the world’s most valuable companies lose their leadership positions, and future leaders are likely to be quite different in the decade ahead. This is a unique problem for passive funds that hold shares in proportion to their market capitalisation. “That feature makes indexing a stealth momentum strategy – a huge benefit to passive investors through the persistent trending market of the last decade but a danger when the trend reverses,” said Marais.

4. Concentration risk is extreme  

“Static investment strategies do not lead to static exposure but increased concentrations in winning stocks,” Marais said. Today, market indices—and thus passive investors—are heavily skewed towards unusually expensive US growth stocks. The MSCI All Country World Index—the most diversified major global index—has 17 per cent invested in just the ‘Magnificent Seven’ companies, 25 per cent in technology sectors, and 64 per cent in a single country and currency (US). Each of these three areas is more richly valued than its opposite. “The US market trades at 27 times earnings versus 16 times for shares elsewhere, while tech shares are valued at a whopping 39 times earnings”, said Marais.

5. Active strategies don’t guarantee diversification  

Orbis notes that concentration issues are not confined to indices and passive strategies. Money tends to flow to the best-performing active-managed funds, which often share style characteristics with what has been driving the market. Today, the biggest active retail global equity funds in Australia are highly correlated to growth styles. Across the top 10 largest actively managed global equity funds, not a single fund has a Value style according to Morningstar’s Equity Style Box methodology. 66% of active assets are in Growth strategies and the remaining 34% is in Core. “Investors may hold active funds for diversification but depending on the underlying investments, they may be diversified in name only and are at risk when the dominant style falls from favour,” said Marais.

“Investors need to diversify across styles within equities. Markets in aggregate are expensive but not uniformly expensive and plenty of value remains available globally for active stock pickers. Holding undervalued assets can make a remarkable difference to investors’ returns in downcycles.”

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