Global equity markets delivered robust returns in 2025, setting the stage for continued growth and diversification in 2026. Investors are now exploring how to allocate capital beyond traditional US benchmarks to capture stronger forward EPS growth and broader sector opportunities.

From developed Europe to emerging Asia, the rally has been defined by expanding breadth and geographic reach. This article unpacks the lessons of 2025 and outlines actionable strategies to navigate the year ahead.

Lessons from the 2025 Market Surge

During 2025, the FTSE All World Index achieved exceptional performance, returning 23.1%—its strongest outperformance of the US in 16 years. Meanwhile, the global equity rally expanded by industry and geography, contrasting with the US market’s increasing concentration in a handful of mega-cap names.

Key drivers included a softer US dollar, six Federal Reserve rate cuts, and expansionary fiscal policies across regions. Non-US equities surged, with the S&P Global Ex-US Broad Market Index up 28%, outpacing both the S&P 500 and S&P US Broad Market Index at around 16%.

Emerging markets led gains, buoyed by China’s AI-driven sectors, Taiwan’s semiconductor prowess, and Latin America’s rate cuts. Despite geopolitical tensions and a mid-year tariff shock, volatility remained contained.

Outlook for 2026: Continuity and New Frontiers

Analysts forecast a continuation of these tailwinds into 2026, with Goldman Sachs anticipating an earnings-driven total return outlook near 11% globally. Growth-adjusted valuations are converging, suggesting that sectors outside of US mega-cap technology may offer relative value.

International developed markets and emerging economies are poised for steady gains. S&P projects continued outperformance ex-US, while JPMorgan and Morgan Stanley forecast double-digit returns in both developed and emerging markets.

Key macro drivers for the year include further Fed rate cuts (25–75 basis points), continued currency diversification, and selective fiscal easing in Europe and Japan.

Key Projections for 2026

Regional Highlights: Opportunities and Risks

Developed Asia ex-Japan leads forward EPS growth, supported by structural reforms and expanding digital infrastructure. In Japan, corporate governance improvements and fiscal expansion signal value unlocking, though the risk of a yen carry-trade unwind persists.

Europe presents opportunities in technology, defense, and healthcare, backed by fiscal spending to enhance self-sufficiency. IPO pipelines remain robust, while value stocks trade at attractive multiples compared to the US.

Emerging markets benefit from weaker US dollar fueled emerging markets, resilient earnings, and prudent fiscal policies. India stands out for its consumer-driven recovery, Brazil for high real rates allowing future cuts, and China for policy support in semiconductors and biotech.

Geopolitical uncertainty and commodity volatility pose risks, but the broadening rally suggests investors can offset regional drawdowns through diversified exposures.

Strategies for a Diversified Portfolio

To harness global trends, investors should consider:

• Allocating 20–30% of equity portfolios to non-US developed markets.
• Emphasizing emerging market equity and debt for enhanced yield potential.
• Balancing growth and value sectors across regions to reduce concentration risk.

Other tactical considerations include currency hedging for tailored exposure, focusing on smaller-cap segments in the US, and increasing allocations to infrastructure themes such as AI, decarbonization, and digitalization.

Key Themes and Actionable Insights

• Diversification & Broadening: Shift from a narrow US/AI focus to a geographic sector breadth advantage.
• Earnings & Fundamentals: Prioritize profits over multiples as multiple expansion potential narrows.
• Currency & Rates: Position for a softer dollar and benefit from anticipated Fed easing.

Conclusion: Charting Your Global Path

As investors look ahead to 2026, the lessons of 2025 underscore the value of broad geographic sector diversification and an earnings-centric approach. Developed markets ex-US and emerging economies offer compelling growth trajectories supported by currency tailwinds and fiscal policy.

By combining regional insights with a balanced allocation framework, investors can capture the next phase of global market expansion while managing risk. The opportunity lies not in a market reset, but a continuation of the global equity rally—one that extends beyond borders and champions an inclusive, diversified strategy.