Jeffrey Palma, head of multi-asset solutions at Cohen & Steers on US equities
Equity markets have delivered strong returns for more than a decade, powered largely by US companies (and, in particular, by a narrow subset of mega‑cap technology names).
However, the factors underpinning that outperformance – low interest rates, benign inflation, expanding profit margins and valuation multiple expansion, among other things – are unlikely to persist at the same scale.
With interest rates structurally higher and inflation more variable, the path for earnings growth becomes more challenging.
We expect US equity returns to moderate toward their long-term averages, with headwinds emerging from compressed margins, rising labour costs, and an elevated cost of capital. Our 10-year forecast of 5.8% annualised returns is unchanged, though valuations remain a central concern.
While earnings growth may continue, starting multiples are likely to compress somewhat. Market concentration adds another layer of risk, as leadership remains heavily dependent on a small number of firms whose valuations already price in substantial future productivity gains.
Opportunities appear more balanced outside the US, where valuations are more attractive and earnings cycles less extended. As such, we expect developed international markets to generate average annual returns of 7%, benefitting from lower starting multiples and sector exposures that are more closely aligned with the themes of the new regime, such as industrials, materials and financials.
Joe Bauernfreund, portfolio manager of AVI Global Opportunities Trust on Korea
The KOSPI achieved a new all-time high of 8,000 in May, returning a remarkable 29% over the month. On closer inspection, however, it is largely the story of two companies.
Samsung Electronics and SK Hynix now account for c53% of the index and have driven most this year’s gains; the KOSPI has returned 109% year-to-date, yet strip out the two memory names and that figure falls to just 49%. The bifurcation is even starker within our own universe: the median name has generated a return of -7% year-to-date, having barely participated in the re-rating at all.
Beneath the surface, Korean equities remain deeply undervalued. Two-thirds of KOSPI constituents still trade below book value, far higher than in Japan, Europe, or the US. The Korea discount has not been eliminated so much as obscured by one of the most dramatic earnings inflections in recent memory, concentrated into just two names.
Unlocking the next leg of performance will require the government to push harder on its value-up agenda, from more prescriptive governance disclosures to the enforcement of the anti-stock price suppression framework. Taken together, these could catalyse the broad-based re-rating of the many quality Korean businesses which remain chronically overlooked by global investors.
Nikki Martin, senior portfolio manager – global equities at Sarasin & Partners on Japan
Japan remains one of the more attractive opportunities within global equities as we enter the second half of 2026. The combination of improving corporate governance, supportive domestic demand, and a gradual normalisation of inflation continues to create a favourable backdrop for earnings growth.
Corporate Japan is undergoing a structural transformation that extends beyond the cyclical recovery. Ongoing reforms aimed at improving capital efficiency, increasing shareholder returns, and enhancing transparency are encouraging companies to focus more closely on profitability and balance-sheet optimisation.
This is supporting higher levels of share buybacks, dividend growth, and more disciplined capital allocation across the market. Recent examples include Tokyo Electron’s substantial share repurchase programme and its continued focus on returning excess capital to shareholders, while other cash-rich companies, such as KEYENCE, have also placed greater emphasis on shareholder returns and capital efficiency.
At the macro level, Japan is benefitting from a healthier inflation environment following decades of deflationary pressure. While the Bank of Japan continues to normalise monetary policy, real interest rates remain supportive and wage growth is helping to underpin consumer spending. Domestic-oriented sectors, including financials and selected service industries, appear increasingly well positioned to benefit from these trends.
We remain selective, however, given ongoing uncertainty surrounding global trade and currency movements. In particular, we favour companies with strong competitive positions, pricing power, and the ability to generate sustainable returns on capital. Overall, Japan offers investors a combination of structural reform, improving corporate fundamentals, and attractive relative valuations, making it a key area of opportunity within global equity portfolios.
Cristina Dyer, portfolio manager of the Evenlode Global Equity fund on UK equities
The UK market continues to offer compelling opportunities for long-term investors willing to look beyond the narrow AI capital investment trade that has driven global returns in recent years.
Many quality UK listed businesses have been cast as “AI losers” and left behind by the market, despite continuing to deliver robust growth in revenues, earnings and cashflows.
Companies like RELX, LSE and Experian operate in structurally growing data and analytics markets, enjoy strong competitive positions and continue to generate very healthy amounts of cash.
Despite this, their valuations have been put through the wringer and steadily compressed. We are starting to see cracks emerge in the “AI loser” narrative. The debate is shifting from models to what is wrapped around the model – the data it can reach, the tools it can use and the repeatable processes it can follow.
AI without the right data can hand you beautifully formatted answers that are completely wrong, faster than ever. The value increasingly lies in products that embed trusted data with compliant processes, areas where RELX, LSE and Experian have spent decades building competitive advantages.
This disconnect between share prices and underlying business fundamentals has created what we believe is one of the most attractive opportunity sets in the UK market for several years. A hand-off in market leadership towards quality appears increasingly likely.
Matt Burdett, portfolio manager of the Thornburg Equity Income Builder fund on Europe
The global market environment remains uncertain, driven by geopolitical events, including fresh escalations in Iran and the evolution of US-China relations, as well as renewed concerns about AI spending.
The disruption to oil supply through the Strait of Hormuz has pushed energy prices higher, creating further inflationary pressure and complicating the outlook for central banks.
Despite these challenges, we construct portfolios based on company fundamentals and earnings growth rather than short-term momentum or top-down calls.
Regionally, we continue to have a majority of our equity exposure outside the US, where valuations are cheaper, dividend yields are higher, and dividend cultures are better. Europe stands out in this regard.
We see particularly attractive opportunities outside the most crowded parts of the market, particularly in businesses that generate strong cashflow, maintain capital discipline, and return capital to shareholders.
For example, many investors have largely focused on obvious AI winners while ignoring the communications networks that will ultimately be needed to support AI applications in the real world.
Telecoms trade at relatively low valuations, and many offer attractive dividend yields. Expectations for the sector are modest, and we think investors are dismissing the potential AI-related demand tailwind, as well as the criticality of digital infrastructure that has become clear since the pandemic.
Telecoms provide option value for AI growth without paying the premium valuations associated with the semiconductor and mega-cap technology sectors.
