In 2026, rewards will come to those who are willing to rebalance boldly but thoughtfully; who diversify globally without abandoning local conviction; and who help clients embrace the entrepreneurial mindset required to navigate the next chapter in global investing. That was the overall message from Morningstar’s Outlook for 2026, presented by Morningstar’s Global Chief Research and Investment Officer, Dan Kemp.
A different kind of outlook
Kemp was quick to make one thing clear: Forecasting with confidence is not only misleading; it actively harms clients. Predictions create expectations and expectations create surprise – a powerful behavioural trigger that prompts investors to freeze, fight or flee. Freezing is manageable. Fighting, trying to trade one’s way out of volatility, rarely works. Fleeing can destroy long-term outcomes.
Staying invested, no matter what
The behavioural research behind the Outlook reinforces three adviser imperatives for 2026: Prepare clients for volatility before it arrives, arm them with clear information, and prioritise education over reaction. When clients expect turbulence, they’re less likely to be shocked by it. When they understand the forces shaping markets, they’re less likely to abandon a well-built plan. And when portfolios are constructed for robustness, investors are better equipped to stay invested and seize opportunity. The year ahead will be noisy. But advisers who anchor clients will give them the best possible chance of reaching their goals.
The AI arms race and the problem of concentration
The global AI narrative has lifted the ‘Magnificent Seven’ to near-mythical status, and with it, investor exposure to a narrow segment of the US market. While concentration alone doesn’t guarantee a correction, it does erode diversification benefits and leaves portfolios vulnerable to sudden sentiment shifts.
It’s worth noting that US small caps remain materially undervalued compared to their large-cap peers, after years of underperformance. Likewise, US healthcare presents attractive entry points in an otherwise fully valued US sector landscape. For clients reluctant to step away from the familiar comfort of US equities, these represent credible pathways to rebalance without abandoning the market entirely.
The case for looking offshore
Much of the real excitement, however, lies outside the US. Emerging markets have delivered strongly, supported by both local performance and a softer dollar. Markets such as Brazil, Mexico and South Korea stand out for their mix of strong economic momentum, structural reform and valuations that still imply upside. China, despite perennial debate, remains a meaningful opportunity set, particularly for tech exposure that is both broad and high quality.
For South African advisers, the offshore diversification message remains essential. But 2026 will require more nuance: not all emerging markets are created equal, and not every undervalued market is undervalued for the right reasons. Country selection matters more than ever.
The dollar will be discounted, but not cheap
One of the trickiest dynamics clients will be grappling with heading into 2026 is the behaviour of the US dollar. After years of dominance, 2025 delivered an uncomfortable reversal. But a weaker dollar doesn’t automatically signal a collapse in reserve-currency status.
The more grounded interpretation is that the dollar is cheaper than it was, but it’s still overvalued. Tools like the Big Mac Index still suggest the rand is more than 40% undervalued relative to the dollar.
For advisers, the message is not to build narratives around the dollar’s demise, but to help clients understand:
- Why a weaker dollar impacts offshore returns
- Why speculation around gold or cryptocurrency often rides on shaky assumptions, and
- How to avoid overreacting to currency cycles.
Most importantly, advisers should caution against DIY currency hedging. Correct hedging depends on client perspective, asset mix, base currency and long-term investment goals, which are variables too complex to manage in isolation.
South Africa, the quiet outperformer
Amid the global narrative, South Africa delivered a surprisingly strong US dollar performance in 2025, largely unnoticed because the country represents just 3% of emerging market indices. It did so without foreign investor inflows, which have continued to trend negative. This means that local returns have been driven by fundamentals, not sentiment.
Much of the JSE’s strength came from a concentrated group of precious-metal miners benefiting from elevated gold and platinum prices. But looking ahead to 2026, the sector-level picture tells a more interesting story:
Resources as a broad category now screen as relatively low-return prospects, especially gold and platinum miners, which appear fully priced
Global diversified miners listed locally, including BHP, Anglo American and Glencore, still show reasonable valuation-based upside
South African financials offer the most compelling real return expectations for rand-based investors. The major banks remain well capitalised, prudently managed, and benefit from valuations that still sit at attractive levels despite economic headwinds.
For local, rand-based investors, SA equities remain priced to deliver higher expected returns than developed and emerging market peers. For international investors, however, South Africa is a tougher sell. The benefits of cheap valuations are offset by liquidity constraints, currency volatility and opportunity costs versus larger emerging markets offering broader exposure.
Guiding clients through the transition
As 2026 unfolds, advisers will play a critical role in helping clients move from passive participation to intentional positioning. The transition resembles a shift from corporate security to entrepreneurial freedom. Clients can’t rely on one dominant market (the US) to do the heavy lifting
Finally, questions around the dollar, US debt and gold serve as a reminder that markets often price in risks long before they appear in the headlines. For advisers, the role in 2026 is clear. Guide your clients away from speculation and toward durable, evidence-based strategy.
