Market Uncertainty Will Persist in 2026. How Should Investors Respond?

While no one can predict precisely what 2026 will bring, one thing is certain: investors must be prepared for a broad range of potential outcomes.

Key Drivers of Uncertainty

• Trade tensions and tariffs remain a dominant theme. Rising US tariff rates could disrupt critical sectors such as pharmaceuticals and semiconductors, while additional levies on Chinese imports may create further dislocation. Our analysis suggests the US economy has yet to fully absorb the impact of previous tariff hikes.

  
  

• Monetary policy will continue to exert significant influence. The Federal Reserve resumed its rate-cutting cycle in September following a nine-month pause, prompted by signs of weakness in the US labour market. This contrasts with other major central banks, which are expected to cut rates sparingly, if at all.

  
  

The Behavioural Challenge

Periods of volatility do not merely test portfolios. They test investors’ discipline. In times of heightened uncertainty, behavioural biases often lead to costly mistakes, such as selling during downturns and missing subsequent recoveries.

The graph below illustrates how investors who reacted to tariff announcements earlier this year by withdrawing from the market would have missed out on substantial gains later in the year.

Source: Morningstar

A Proven Framework for Navigating Uncertainty

• Avoid knee-jerk reactions to headlines: Selling during market downturns risks missing sharp recovery rallies. Missing just the best ten trading days over the past 25 years would have more than halved long-term returns.

  
  

• Rebalance and remain committed to your strategy: Countercyclical rebalancing (i.e. selling winners and buying undervalued assets) has historically added value during volatile periods.

  
  

• Identify opportunities where markets have overcorrected: Elevated uncertainty often leads to mispricing. Careful analysis of fundamentals can uncover attractive entry points when sentiment overshoots reality.

  
  

The Bottom Line

Uncertainty is an enduring feature of investing. The most effective approach is to acknowledge behavioural biases, prepare for a range of economic scenarios, and anchor decisions in a disciplined, long-term framework.