4 market themes to watch in 2026

As we head into another year of investing, there's plenty to unpack.

First, let's see how the basics shape up, because what really excites me for 2026 is that Australian investors can lean into strong economic foundations - and that's always a good starting point.

The backdrop is positive 

I've never had any doubts that Australia is a great place to live, invest and grow wealth. And the past year has reaffirmed this.  

Our stable democracy and well-regulated asset markets give each of us the confidence to invest. Even better, as we dive into 2026, plenty of economic indicators look positive:

• The Aussie economy is showing its staying power, with forecast growth of 2.2% for 2026 driven by strong domestic demand. 
• Employers continue to open up thousands of new jobs, pushing the jobless rate to a wafer thin 4.1%, down from 4.3% in November 2025.  
• Despite a cost-of-living crunch, households are still spending. Sure, this may be adding to inflation but it's good for the business sector - including listed companies.   

Equally important, the global economy is forecast to grow by 2.7% in 2026, with growth expected across Europe, Japan, and the United States.  

So far, so good. But what lies ahead for investment markets? 

Let me point out that I don't possess an accurate crystal ball. So, I'm not about to make hard and fast predictions about asset markets.  

What I can do is explain what I think the overarching themes are for 2026 - and the issues we can control as individual investors. 

1. Volatility is likely to be part of 2026 

From US plans to seize Greenland, to Trump's threats of a tariff-based trade war in Europe and the by-now familiar TACO (Trump always chickens out) trade, 2026 has dished up more than its fair share of geopolitical events - and it's only early February!

No investor enjoys unpredictability and market volatility. And while I'd like to say it will be smooth sailing from here, I highly doubt that's the case.  

Notwithstanding the US mid-term elections to be held later this year, which may see the Trump administration tone things down a bit, chances are we can continue to expect the unexpected this year. 

That could mean a bumpy road ahead for share markets both internationally and here in Australia.  

Key takeout: Volatility is part of investing. What matters is how you respond. Panic selling when markets take a dip can see investors lose money on assets that recover their value - often surprisingly quickly. 

In the current environment, sticking to your long-term goals can be a great way to avoid knee-jerk reactions when markets take a bath in the red.

 2. Higher interest rates - a quick finetune or broader upward trend?  

As I write, the Reserve Bank of Australia (RBA) has lifted the cash rate by 0.25% to 3.85%. 

It's the first hike since late 2023, but the real question is whether it's a one-off? 

Both Commonwealth Bank, which picked the February rate rise in December, and NAB are expecting more hikes, saying the cash rate could reach 4.10% by mid-2026.  

Key takeout: Time will tell how these forecasts pan out. Either way, now's the time to check if you're paying a competitive rate on your home loan and other personal debt. A little shopping around, or a chat with your mortgage broker, could reveal opportunities to save. 

3. Exposure to growth assets pays off long-term 

Higher rates coupled with the potential for share market volatility can make it tempting to shift part of your portfolio, maybe even your super, out of less lively assets like shares and into the safer environment of cash.

Whether or not that's the right move for you depends on your financial needs and tolerance for risk.   

Whatever the case, it's worth considering analysis by SuperRatings, which confirms that exposure to growth assets pays off over time.  

SuperRatings looked at how $100,000 invested in super 16 years ago in 2010 would have fared across different investment options assuming no further contributions.  

It found that: 

• $100,000 invested in a 'growth' option (with high exposure to shares) back in 2010 would have grown to about $337,878 today.
• Those who chose a balanced option (around 60% exposure to shares) would now have around $304,911.
• Investors who tipped $100,000 in a cash-based super option in 2010 would be looking at an account balance of about $146,378 today. 

Key takeout: While the SuperRatings analysis looks at super, it's a compelling argument to include at least some growth assets in your portfolio. This applies no matter whether you're starting out as a young investor, or heading into retirement.  

Growth assets don't always deliver steady returns. But the long-term trend is upwards - and at a much faster pace than cash. 

4. Diversification - more effective than educated guesses 

• Will the artificial intelligence (AI) bubble burst?  
• Are commodities the new must-have investment? 
• Should I invest in gold?  

These are just some of the questions I'm often asked by investors hoping to tap into the latest trends. 

I freely admit, I don't have hard and fast answers. That's why I diversify my portfolio across asset classes and geographic regions. It reduces portfolio risk, helps shield my wealth from falls in any one particular market, and will likely give me exposure to any growth trends. 

If you're looking for a low-cost, low-capital, low-effort way to diversify, exchange-traded funds (ETFs) may be the answer. More Australians are realising this with a record $51.8 billion flowing into Australian ETFs in 2025. 

Key takeout: The beauty of ETFs is that they can form the core of your portfolio. Then, if you have a view about how a particular asset class will perform, you can almost certainly find an ETF that lets you invest in line with your views, with the added bonus of very low fees.  

The bottom line 

No one can pick exactly what markets will do over the next 12 months. And I'd be very wary of anyone who claims they can.  

What you can do is make the most of a broadly positive investment environment. Diversify your portfolio, check that you're paying competitive rates on any personal debt, and keep a lid on investment fees.  

Tick these three boxes, and you're well-placed to grow wealth this year.