According to Pictet AM, geographic diversification, with Asia (Japan, China, Vietnam) as the top zone, should deliver the best performance over the next few quarters. Active management is a good idea for investing in Europe and in AI stocks, with robotics as the first choice. Frontier markets still offer value, according to Pictet AM.
Unperturbed, and despite the geopolitical pitfalls, global growth remains on course, driven by the United States and emerging countries. Corporate profits are continuing to rise, with artificial intelligence already delivering productivity gains. Monetary policies remain accommodative, even though the cycle of rate cuts is slowly coming to an end.
On the stock market, while hedge funds remain key trend-setters, accounting for up to 22% of equity volumes, US retail investors are also increasingly present and ‘playing’ with leverage through ETFs, with usage almost tripling since 2021..
In Europe, the stimulus introduced by Germany will produce its first effects in the second half of the year, with growth hovering around 1.5%.
With the hope of a strategic awakening, Europe, with its attractive valuations, may offer some opportunities in equities, but with selective choices.
Even so, between 2019 and 2024, cumulative productivity rose by 9.7% in the United States, compared with 2.4% in Europe. This divergence is confirmed, accelerating and becoming more widespread.
Asia emancipates itself
A new megatrend is taking off. “Asia buys Asia”, a phenomenon that is developing at the same time as emancipation from the West in the area of world trade. Asia is also seeking to free itself from the US dollar by increasing the use of its own currencies. As a result, Asia’s GDP is accelerating as a global player, with India, Japan and China leading the way.
This awakening is reflected in the Nikkei index, which emerged from a long period of lethargy in 2025 when it surpassed the 40,000 mark, the index’s highest level since ….. 1989, a ceiling that had been reached during the bubble at the end of the 80s.
2026: the year of robotics
The change in mentality of corporate managers is no stranger to the Nikkei’s performance. Share buy-backs have almost doubled in recent years, as Japanese companies have amassed mountains of cash over the years. Another factor underpinning the rise was the renewed dynamism of merger and acquisition transactions, which exploded. An explosive cocktail that has boosted the index by almost 50% in less than 12 months.
With robotics heralded as the next big step in AI, China seems to have a head start that will benefit its growth. 2026 will be the year of robotics, says Christopher Dembik, Investment Strategy Adviser at Pictet AM.
But robotics will not be China’s only supplier of growth. Chinese companies are beginning to enter the luxury niche and even overshadow the Western luxury leaders. Laopu Gold, a Chinese company which has become emblematic and which plays on the nationalist fibre in the Middle Kingdom, has posted a rise of more than 130% on the stock market in the space of ten months, leaving European Hermes far behind… down by more than 10% over the same period (to the end of January).
China, but in a different way..
Christopher Dembik does, however, caution against buying Chinese companies on the stock market. State intervention can be as unexpected as it is devastating. With the recent example of Trip.com, a great Chinese success story, which probably disturbed the authorities a little too much. A few years ago, Jack Ma, the Chinese boss of Alibaba, was also forced to step down after a firm warning from the Chinese authorities. Given this uncertainty, investing in an index may not be the best idea. “The long/short technique via a fund is more appropriate for investing in Chinese equities,” suggests Christopher Dembik.
A little further south, Vietnam, immersed in its economic reforms, is in the midst of a boom and is singled out as a good pupil by Christopher Dembik. A stock market that is less volatile than many investors imagine, and also less dependent on the performance of the dollar, unlike some other frontier markets. Another idea is the Romanian market, which after a meteoric rise of 91% in dollar terms in 2025 (the best performance of all dollar-denominated markets) … still does not appear to be highly valued. These are often overlooked markets with a wealth of opportunities, such as local bonds.
Investors looking for a fixed yield can take advantage of the higher yields still provided by these 10-year emerging bonds in local currency. For example, benefiting from a solid environment, Brazilian 10-year bonds, in real terms, offer a real return of 10% and in Colombia, again in local currency (Colombian pesos), this return is still over 9%… while at the other end of the yield chain, Switzerland pays… a negative real return of 0.5%. A strategy such as Pictet-Emerging Local Currency Debt is more appropriate for optimising diversification.
And let’s not forget that the fall in the dollar is easing the burden of servicing the debt of these emerging countries and encouraging them to move into the emerging zone.
Further declines in interest rates and an explosion in digital products based on artificial intelligence are other drivers capable of pushing emerging markets higher.
Solar energy, platforms, precious metals, the dollar..
In the energy sector, solar power is emerging as the cheapest form of energy, with the use of increasingly efficient batteries. The total cost of $33 per megawatt-hour is currently unbeatable.
The earnings outlook for AI stocks, on average, will always be robust and higher than for other stocks, in terms of quarterly growth in earnings per share.
However, some US tech stocks appear to be overvalued, and the fickleness of Donald Trump’s policies have encouraged some investors to switch from the US to European equities.
When it comes to investing in artificial intelligence, Christopher Dembik prefers to invest in platforms, which are often profitable and have cash available.
Amazon, with the success of its cloud services, the success of its new Trainium3 chip which is reducing its operating costs, with advertising constantly on the rise and becoming more and more a second profit driver, the platform’s margins are becoming more and more solid and is cited as the favourite stock among the Magnificent Seven.
The semi-conductor sector is a little trickier… with hedge funds posting record levels of investment in the sector at the end of January and not known for being long-term investors..
With gold still accounting for less than 20% of the foreign exchange reserves of the world’s central banks, the wind is still at the back of gold’s sails as de-dollarisation continues.
Keeping an eye out
But there are still risks, and we need to keep our eyes open and our wits about us. The leverage maintained by private investors and hedge funds, together with the yen carry trade, can be double-edged knives if the markets show signs of weakness. Just like the unpredictability of the Trump administration. And in the USA, with US private credit at record highs, the integration of crypto-currencies into finance could also turn into a risk for the markets.
Lastly, the dollar is likely to continue to fall, albeit less sharply, and precious metals remain in a super-cycle, now benefiting from purchases by institutional investors, who hold just 3% of the total… (compared with a peak of 13% in the past).
In general, the backdrop of resilient global growth, supported by accommodative monetary policies, solid corporate earnings and the sustained momentum of artificial intelligence are factors that will favour risky assets.
