Portfolio positioning and favoured themes for 2026
As usual at this time of year, there is no shortage of forecasts as to expected returns from markets and stocks. The portfolios tend to plough their own furrow relative to remits. Yet such a moment allows for a period of contemplation in a fast-moving world. These monthly columns have over the last year touched on various market and sector themes, but a re-examination of one’s thinking can be beneficial. This is especially the case if positions have enjoyed strong runs, for maintaining portfolio balance is a discipline which has stood the test of time. It also allows for any monies realised to be invested in opportunities which have perhaps slipped below the radar.
Portfolio positioning
Previous columns have explained why the portfolios remain underweight equities relative to respective benchmarks. This reflects concerns about the state of the global economy, the extent of government spending and debt, over regulation and high taxation, all of which is stifling the wealth-creating private sector. Meanwhile, more volatile and higher than expected inflation will bedevil policy makers. While not questioning the long-term case for well-chosen equities, for the moment this combination and factors such as heightened geo-political risk makes for stagflation and therefore caution regarding equity exposure.
Within this equity underweighting, the portfolios remain underweight the US and overweight better value markets including the UK and Europe. We are wary of the valuations afforded the larger US technology companies, believing the extent of spending on Artificial Intelligence (AI) has yet to be justified – and may never will. Yet the level of market concentration courtesy of these companies poses increased risk and draws the oxygen out of the room regarding the attractions of other markets. The sands of sentiment appear to be shifting, and the portfolios are positioned accordingly.
Within this equity positioning, the continued prospect of lowish or no growth together with persistent inflation influences stock choices. For reasons highlighted in the column ‘Seeking value’ (26 September 2025), history suggests stagflation usually benefits ‘value’ stocks. There is no reason to believe it will be different this time. These stocks are once again set to have their day in the sun in part because of their more reliable near-term cashflows, cheaper ratings and often higher yields. The portfolios stand ready to benefit and early indications suggest the reward could be handsome.
Beyond equities, the challenge is to achieve effective diversification relative to remits. As highlighted in previous columns, our portfolios intend to remain underweight bonds – especially longer-dated gilts. This is because stagflation typically raises the correlation between equities and bonds, which makes for less effective diversification. And we prefer corporate bonds over government given their stronger balance sheets. The other alternative assets employed by the portfolios include infrastructure, precious metals and cash.
Yet, in walking this journey with humility, could I be wrong about growth and inflation? Are the economic assumptions underpinning the portfolios’ positioning invalid? I venture not. The likelihood of governments reigning in spending, borrowing less, lowering personal and corporate taxes, and ending ‘regulation of the graveyard’, seems remote. An economic or political shock could move the dial – living standards have not risen in this country since the legacy of Thatcherism ended. This seems less remote, which again justifies the portfolios’ underweighting of equities at least in the short-term. Otherwise, the column ‘Preparing for inflation (2)‘ (18 July 2025) explains the reasoning on inflation.
Could I be wrong about the geo-politics? Could sense and diplomacy return? This is unlikely, at least in the short-term. If anything, since touching on this issue last year, the dystopian world of 1984 draws nearer. The Pentagon’s recent ‘National Defense Strategy’ downplays the threat posed by China and Russia, offers ‘more limited’ support to allies, and focuses on the ‘concrete interests’ of Americans. This is not a return to isolationism, but it is a step closer. History suggests inward-looking blocs or spheres of influence tend to be less democratic, more regulated and low growth – making friction with other such blocs more likely. Meanwhile, in part courtesy of Venezuela, other flashpoints beckon around the world.
Favoured themes
On the flip side, the lustre of gold is reinforced. The meaningful change within other assets in 2025 was the increase to precious metals and mining companies – which complemented existing exposure to commodities. Columns such as ‘The case for precious metals’ (22 November 2024) and ‘Could Gold become the new global reserve asset?’ (30 October 2025) explain the logic. Apart from the metal ETFs (there are no investment trust equivalents), holdings include CQS Natural Resources Growth & Income (CYN), Golden Prospect Precious Metals (GPM) and BlackRock World Mining Trust (BRWM).
Uranium is another favoured theme, via Geiger Counter Ltd (GCL). The company invests in companies predominantly focused on bringing uranium to market. Global ambitions to triple nuclear generating capacity by 2050 provide a strong tailwind, with recent news highlighting government-led support for the sector. The US has announced a $2.7bn funding package to improve its domestic enrichment capacity, EDF is looking to construct six new reactors in Europe, while Taiwan is thinking of restarting two mothballed reactors.
In addition to the environmental agenda, growing concerns about energy security provide added impetus. Heightened geo-political tensions, together with Kazakhstan’s dominance in production, is encouraging a strategic reappraisal of uranium’s importance. Fukushima is now a distant memory in many corridors of power. Furthermore, uranium tends to be price inelastic given the spot price makes up just around 5% of the cost of producing nuclear power. While sub-optimal inventory levels in western markets may also help to explain why the price has been rising recently.
Finally, healthcare is another favoured theme for reasons highlighted in the column ‘Healthy prospects’ (28 November 2025). Holdings include Worldwide Healthcare Trust (WWH), International Biotechnology Trust (IBT) and Syncona Limited (SYNC). In addition to possessing some of the strongest tailwinds of any sector, including ageing demographics and innovation, the political headwinds that can sometimes bedevil the sector appear to be dissipating. Together with attractive valuations and poor sentiment, especially in the biotechnology sector, the investment case has improved markedly of late.
Disclaimer: The information contained in this article is for general information purposes only and does not constitute investment advice or a personal recommendation, nor does it represent an invitation or inducement to engage in any investment activity. You should seek independent financial advice before making any investment decisions. Past performance is not a reliable indicator of future results. The value of investment company shares, and any income derived from them, may fall as well as rise, and you may not recover the full amount invested, or in some cases, any of it.
Return to News