Market Outlook 2026

As cloudy as ever

As any veteran forecaster will tell you, the crystal ball is as cloudy as ever. Trade discord continues to weigh heavily on the global outlook. To this, we now add stretched valuations for US technology stocks, driven by buoyant expectations for artificial intelligence.

Sluggish growth, high inflation

In 2026, major economies are facing mild stagflation – sub-par growth and elevated inflation. Population growth remains firmer in Australia and more subdued in New Zealand, driving divergent demand cycles in 2026 and beyond.

The end is nigh for rate cuts

Stubbornly elevated inflation will bind the hands of central bankers. The window for rate cuts has closed. Investors are now turning their attention to rate hikes in 2026. Investors need to reconfigure their portfolios for this new economic landscape.

Credit versus equity

Interest rates set the price of money over time. It also tilts the balance between equity and credit returns. At current rates, real estate credit is still outperforming real estate equity, albeit to a narrower extent, as equity rebounds in 2026.

Sector selection

While more sectors are returning to profitability, there is likely to be persistent alpha from sector selection. Residential and living segments are still well set to lead the way, followed by industrial and retail sectors, with office expected to lag in 2026.

Navigating markets in 2026

With a subdued economic outlook, investors are set to push into real, resilient incomes, particularly where there are good demand fundamentals like the living sector. The need for inflation and rate hedges are bringing the focus back onto real estate.