Multi-asset investors are facing a more volatile and less predictable market environment as inflation, geopolitics, fiscal pressures and market concentration reshape portfolio construction, panellists at the Morningstar Investment Conference UK 2026 said last week.
Speaking during the “Navigating the Investment Landscape Breakout: Multi-Asset Investing in 2026: What Matters Next” session moderated by Tom Mills, principal, multi-asset strategies, Morningstar, were David Coombs, head of multi-asset investments, Rathbones Asset Management; John Roe, head of multi-asset, L&G Asset Management and Charlotte Yonge, senior fund manager, Troy Asset Management.
Panellists said that the investment environment differed from the low-inflation, low-rate conditions that characterised much of the previous decade. Structural inflation risks, higher borrowing costs and more unstable political conditions were identified as key themes likely to persist through the coming years.
Concerns were also raised over fiscal sustainability, with rising debt levels across developed economies expected to create additional market volatility. Fiscal problems often appear manageable “until they’re not”, referencing the UK liability-driven investment crisis as an example of how quickly markets can reprice risk.
Panellists said AI-related investment expectations had become heavily concentrated in sectors such as semiconductors and technology, increasing the risk of volatility and market dislocations if expectations fail to materialise.
The discussion suggested the traditional “buy and hold” approach that worked for much of the past two decades may become less effective in a more cyclical and inflationary environment, requiring investors to adopt more active asset allocation strategies.
Protecting against downside risk while remaining invested was identified as a major challenge for multi-asset managers. Dynamic asset allocation, valuation discipline and selective exposure to long-term structural themes were cited as important tools for balancing growth opportunities against market risks.
Electrification and infrastructure investment were highlighted as attractive long-term themes, particularly given underinvestment in energy grids and hard assets. At the same time, panellists cautioned against chasing overcrowded areas of the market purely because of AI enthusiasm.
Fixed income also featured prominently in the discussion, with Coombs, Mills, Roe and Yonge saying that sovereign bonds could once again serve as effective portfolio diversifiers after failing to protect investors during the recent inflation shock. Higher starting yields and attractive real income levels were cited as reasons bonds may play a more defensive role in future recessionary scenarios.
Inflation-linked bonds were also viewed favourably, as they remained relatively inexpensive despite ongoing inflation concerns and large fiscal deficits globally.
While the US continues to dominate equity markets and AI-related growth sectors, panellists said investors should think more carefully about concentration risk and currency exposure. One of the recommendations was maintaining exposure to US growth sectors while reducing exposure to more expensive parts of the market through selective sector positioning.
Asia was identified as an increasingly important investment opportunity because of stronger demographics, economic growth potential and closer regional trade links.
The panel concluded that advisers needed to be clear about the objectives of multi-asset strategies before selecting funds for clients. Multi-asset funds can pursue different goals, ranging from absolute returns and inflation protection to benchmark-relative performance, making portfolio objectives and risk expectations critical when assessing investment approaches.
