After a year of sharp swings and rapid recoveries, investors have headed into 2026 facing an unusually wide range of market risks.
According to CommSec’s 2026 market outlook, global markets have shown an impressive ability to rebound from shocks, but this year is shaping up to be anything but predictable.
Resilience in 2025
Markets endured frequent shocks throughout 2025 – inflation surprises, central bank uncertainty, geopolitical flare-ups and commodity price volatility. Yet each time, markets recovered faster than many expected.
That resilience reinforces a core investment lesson: while headlines can move prices in the short term, long-term outcomes are driven by earnings, policy settings and economic fundamentals.
Investors who reacted emotionally or quickly to 2025’s volatility may have seen losses or missed recoveries. The challenge for investors in 2026 will be maintaining this perspective amid what may be even more persistent volatility.
Early indicators will arrive quickly. US earnings season kicks off in January, followed by Australian corporate reporting in February. These results will likely set the tone for investor sentiment through the first half of the year and provide crucial insight into whether corporate performance can justify current valuations.
Factors likely to impact investors in 2026
The opportunities and risk of the AI boom
Artificial intelligence (AI) remains one of the dominant investment themes globally. The “Magnificent Seven” – a group of seven major US technology companies that collectively control much of the world’s leading AI platforms, infrastructure and data – now account for a significant share of global market capitalisation. According to reports, the group collectively owns around 35% of the S&P 500 Index. While this concentration has delivered impressive returns for many investors, it also introduces significant risk.
When portfolio returns become heavily dependent on the performance of just a few stocks or sectors, vulnerability can increase. A setback in the tech sector – whether from regulatory pressure, disappointing earnings or simply profit-taking after strong gains – could have ripple effects across portfolios that lack adequate diversification.
That concentration risk is where strategy matters most. Working with a Gold Coast financial adviser like RFS Advice allows portfolios to be constructed with exposure to growth opportunities, while also spreading risk across asset classes, regions and time horizons to support more resilient long-term outcomes.
Interest rates are no longer moving in sync
Another challenge heading into 2026 is the growing divergence in global interest rate expectations. While the USA may continue its rate-cutting cycle as inflation moderates further in 2026, Australia’s outlook may be different. The Reserve Bank of Australia (RBA) is contending with persistent inflationary pressures that may keep rates on hold for longer than originally expected.
In October, annual trimmed mean inflation (the RBA’s preferred measure) rose to 3.3%, from 3.2% the previous month, according to the Australian Bureau of Statistics.
As the graph above shows, inflation steadily increased in the back half of last year, heading further away from the RBA’s target range of 2-3%.
Following the release of the most recent inflation results, several market commentators revised their expectations for rates in 2026. The Commonwealth Bank and NAB, for instance, believe the RBA will raise rates when the board meets next, in February.
This divergence of Australia’s interest rate environment from other major economies has important implications for currency movements, cross-border investment returns and domestic asset valuations.
For investors approaching retirement planning, interest rate uncertainty can affect income-generating assets, borrowing costs and the sustainability of portfolio drawdowns. At times like these, strategy matters more than prediction and working with a financial planner can help.
Upside potential of Australian equities
The Australian Securities Exchange (ASX) delivered modest returns for 2025, significantly lagging the performance of US markets. As the graph below shows, Australia’s benchmark index ended the year around 4.5% higher, compared to double-digit growth for the S&P 500 Index.
For investors who remained closer to home, that outcome has been disappointing relative to the US market, where major technology stocks have propelled much stronger gains.
However, there are signs that the outlook for Australian shares could improve in 2026. The Australian Financial Review noted in December that “things could be set to change in 2026”, citing Morgan Stanley forecasts that place the ASX “around 10% higher than its current levels” by the end of next year. If that forecast eventuates, it would represent the local market’s strongest annual performance since 2021.
This potential rebound highlights the importance of staying focused on earnings, valuations and long-term fundamentals, rather than extrapolating recent underperformance into the future. For investors, particularly those balancing growth and capital preservation as part of broader financial planning, Australian equities may still play an important role, provided expectations are realistic and portfolios are properly diversified.
Geopolitics and commodities could add to volatility
Geopolitical uncertainty shows few signs of decreasing in 2026. US tariff policy, upcoming midterm elections and ongoing tensions with China continue to create the potential for sudden market swings.
Commodity markets are another potential source of risk. Gold and copper reached record highs in 2025, driven by geopolitical uncertainty, central bank demand and electrification trends. At the same time, iron ore faces downward pressure if Chinese growth weakens further.
For investors with resource-heavy portfolios, this could lead to further vulnerability as uncertainty continues.
Why reacting to volatility can undermine long-term success
Taken together, the factors examined above point to a market environment where opportunity and risk exist side by side. Concentrated portfolios, diverging interest rate paths, uneven regional performance and persistent geopolitical uncertainty all increase the likelihood of sudden market swings in 2026. For investors, this makes short-term market moves harder to interpret – and emotional decision-making more tempting.
If 2025 taught us anything, reacting to short-term changes can cause long-term damage to your overall wealth portfolio. Selling during periods of uncertainty often locks in losses and increases the risk of missing recoveries, which can occur quickly and unexpectedly. Similarly, chasing recent winners or abandoning a disciplined strategy in favour of whatever’s currently working can lead to buying high and selling low.
This is where working with a financial adviser on the Gold Coast who understands your individual circumstances becomes invaluable. Professional guidance helps maintain perspective when emotions run high and keeps investment decisions aligned with long-term goals rather than short-term market noise.
The role of diversification
In a volatile and uncertain environment like what we expect to face in 2026, diversification can be a way to balance your portfolio. This means spreading exposure across asset classes, locations, sectors and individual holdings.
Equally important is aligning investment strategy with time horizon and risk tolerance. A wealth creator in their 40s has very different needs from someone transitioning into retirement or aged care planning.
How RFS Advice helps clients navigate uncertain markets
As a trusted Gold Coast financial adviser, RFS Advice helps clients navigate uncertain markets through disciplined portfolio construction and long-term planning. Our approach centres on understanding your individual circumstances, goals and risk tolerance – then building an investment strategy that serves your long-term interests rather than reacting to every market headline.
Whether you’re building wealth, approaching retirement or managing assets through your later years, having an experienced financial planner alongside you provides both technical expertise and emotional support when markets shift.
If you’re looking to navigate wealth creation in 2026, contact RFS Advice to begin shaping a long-term strategy tailored to your circumstances.
General Advice Warning
This information is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider whether the information is appropriate to your circumstances and seek personal advice before making any financial decisions
Frequently asked questions
Not necessarily. Volatility alone is not a reason to change strategy. What matters is whether your portfolio still aligns with your goals, time horizon and risk tolerance. A financial planner can help assess whether adjustments are needed without reacting emotionally to short-term market movements.
For most investors, diversification is important as markets face ongoing uncertainty from interest rates, geopolitics and concentrated exposure to certain stocks. Spreading investments across asset classes and regions can help manage volatility and reduce risk. The right mix depends on your goals, time horizon and risk tolerance, so tailored financial planning advice from a Gold Coast financial adviser can help ensure diversification supports your retirement planning strategy.
Periods of uncertainty often feel uncomfortable, but markets have historically rewarded long-term investors who stay disciplined. The key is having a strategy suited to your stage of life and objectives, supported by sound financial planning rather than short-term predictions.
