Todd Hoare from LGT Wealth Management expresses confidence about global equities heading into 2026, following an extraordinary three-year run. Hoare points out that while an 80% rolling three-year return is remarkable, history shows it is unusual, though not unprecedented, for markets to experience a fourth consecutive positive year. He observes that such strong runs are often accompanied by increased volatility and significant drawdowns, and cautions investors to anticipate more intra-year market swings. According to Hoare, the so-called “Mag Seven” group of stocks are seeing the momentum trade unwinding, signalling the start of a more discerning approach from investors towards artificial intelligence (AI) opportunities.
Hoare notes a shift in market focus, citing results from Meta Platforms ($META), where soaring operating expenditure and capital expenditure for AI initiatives have raised concerns. He attributes increased equity and financial risk to the use of debt financing for AI-related investments among hyperscalers. Hoare expects these factors to drive further volatility and advises that, while AI may not face a dramatic bubble burst similar to 2001’s dotcom crash, investors should brace for a boom-bust cycle typical of heavy capital expenditure phases.
Despite the dominance of US equities, Hoare sees potential beyond America. He highlights promising reforms in Japan and Korea, improved fiscal capacity in Germany, and the strength of Southern European economies. Hoare also questions whether sanctions may accelerate China’s technological rise, particularly if companies like Nvidia ($NVDA) and ASML ($ASML) resume sales in the region. He concludes that while the US remains exceptional, attractive opportunities are emerging in other global markets.
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