Challenge for 2026: balance resilience and opportunism

To succeed in 2026, portfolios will need to balance resilience with the ability to participate in market opportunities, says Corrado Tiralongo, chief investment officer with Canada Life.

Speaking on the Soundbites podcast this week, he said he expects growth to be uneven across regions.

“Policy cycles are diverging, and the interplay between AI investment and global fragmentation creates a more volatile backdrop than we’ve been used to,” he said.

“So the plan for investors should be clear: Lean into quality across equities, rebuild diversification through intermediate-duration bonds, and maintain a consistent allocation to alternatives that behave differently when stock–bond correlations break down.”

Looking back over 2025, Tiralongo said AI capital spending was the clearest structural trends driving returns.

“Technology investment was massive, earnings across cloud and semiconductor ecosystems were strong, and productivity optimism supported equity leadership,” he said.

Other drivers included real-yield dynamics and the fracturing of the global economy.

“These shifts are shaping supply chains and cost structures, not temporarily but durably,” he said, adding that valuations did much of the work in driving equity performance at the start of the year.

“Multiples expanded as inflation cooled and markets anticipated rate cuts. But as the year progressed, earnings delivery took over,” he said.

“Looking into 2026, multiples have less room to run. Yields may remain stickier than investors hope. That shifts the burden of returns onto fundamentals, margins, capital discipline, and genuine productivity improvements rather than valuation expansion.”

Tiralongo said the concentration of capital in a relatively small number of tech names is expected to ease in the coming year, but not rapidly.

“The picture points to gradual, not dramatic, change,” he said. “The mega-caps still have scale advantages and strong earnings power. But equal-weight indices are stabilizing. Quality cyclicals and industrials are participating more. And several non-U.S. markets are benefiting from different growth drivers.”

For advisors, he said, it’s about maintaining exposure while using mandates that reduce concentration risk and reward capital discipline.

On the fixed income front, the current environment supports a neutral-to-slightly-longer duration stance.

“Rates have dominated fixed-income returns all year. Central banks are easing, but slowly. Fiscal pressures are rising, and governments have incentives to keep long-term yields from moving too far, too fast,” he said. “Real yields remain appealing. Duration is beginning to act as a diversifier again. And long-end volatility may remain contained by both policy and regulatory dynamics.”

He said spreads remained tight in 2025 because fundamentals held up and demand for yield stayed strong. But dispersion is increasing.

“The best opportunities heading into 2026 look to be in short-duration investment grade and high-quality private credit,” he said. “Both offer attractive yields with manageable downside risk.”

Further diversification can be found in real assets. He said they look attractive in an environment where inflation moderates but remains structurally higher.

“Supply chains are less global. Trade relationships are more fragmented. Tariffs and industrial policy are shaping cost structures in a way that increase nominal volatility. Real assets matter in that world,” he said.

Above all, he said, avoid concentration.

“We’re entering into a multi-polar environment where leadership rotates more quickly,” he said. “A well-balanced portfolio with diversified sources of return is the best preparation for 2026.”

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This article is part of the Soundbites program, sponsored by Canada Life. The article was written without sponsor input.