The first half of 2026 has been a reminder that markets rarely move in a straight line. Investors have navigated geopolitical tensions, stubborn inflation, changing interest rate expectations and constant discussion around artificial intelligence (AI).

Despite these headwinds, share markets have remained remarkably resilient, supported by solid corporate earnings and a stronger-than-expected global economy.

What to expect in the second half

The second half of 2026 is likely to bring further bouts of market volatility. Inflation remains above the levels central banks would like, geopolitical tensions continue to create uncertainty, and elevated market valuations leave less room for disappointment.

Despite these headwinds, the broader economic backdrop remains constructive. Recession risks are still relatively low, company earnings continue to grow, and expectations that central banks will begin easing monetary policy in 2027 should provide a supportive environment for investors.

While short-term market movements are likely to remain unpredictable, the long-term outlook continues to favour investors who stay focused on their investment objectives rather than reacting to day-to-day market noise.

How investment positioning has changed

Earlier this year, many investment managers favoured a ‘barbell’ strategy, that is, balancing growth and value investments while avoiding the middle ground.

Following strong market performance and more balanced valuations, a more neutral allocation across growth, value and core investments now appears appropriate.

Two areas continue to stand out, albeit with higher levels of volatility:

  • Smaller companies, which continue to trade at attractive valuations and may offer compelling long-term opportunities
  • Property and REITs, which could benefit if interest rates begin easing in 2027.
Structural themes remain intact

While short-term market sentiment will continue to shift, several long-term investment themes remain firmly in place: Artificial intelligence, energy security, infrastructure investment, defence, and the ongoing reshaping of global supply chains.

These structural trends are expected to support earnings growth well beyond the current economic cycle.

Private and unlisted assets also continue to play an important role in diversified portfolios. However, manager selection is increasingly important.

Rather than simply chasing higher returns, particularly in private credit, investors should focus on the quality of the underlying assets, underwriting standards, liquidity management, valuation processes and governance.

The takeaway for investors

Periods of market uncertainty are inevitable, but history shows that markets can recover quickly, making market timing extremely difficult.

Instead, investors should focus on the fundamentals:

  • Set an asset allocation aligned to your long-term objectives
  • Diversify across listed and unlisted assets
  • Rebalance portfolios regularly
  • Undertake thorough due diligence, particularly when investing in unlisted assets
  • Avoid making investment decisions based on short-term headlines

Successful investing is rarely about predicting the next market move. It’s remaining disciplined, staying diversified and keeping your focus on long-term objectives rather than reacting to the inevitable bumps along the journey.