Where are we right now in the investment cycle?
We would describe the global investment cycle in mid-2026 as late-cycle expansion, but not yet at the end of the cycle. It is a more complex environment than a typical late cycle because AI-driven investment is creating a structural growth theme while many economies are still dealing with the after-effects of high inflation and interest rates.
Economic growth: Slowing but still positive
Most developed economies continue to grow, although at a modest pace.
- US GDP growth has moderated but remains positive.
- Australia is growing slowly, supported by population growth.
- Europe remains sluggish.
- China continues to face structural challenges in property and demographics but has provided targeted stimulus.
This is typical of a mature expansion rather than the beginning of a recession.
Typical characteristics of this stage
This part of the cycle often sees:
- Positive but more moderate equity returns.
- Greater market volatility.
- Leadership broadening beyond the largest technology companies.
- Bonds becoming more attractive as portfolio diversifiers.
- Increased importance of company earnings rather than simple valuation expansion.
Risks over the next 12 - 24 months
The biggest risks include:
- A sharper-than-expected economic slowdown.
- Inflation proving stickier than expected.
- Geopolitical events disrupting markets.
- Equity valuations, particularly in parts of the US market, remaining stretched.
What this means for investors
For a long-term investor, this is generally not a time to try to "call the top." Instead, it's a time to focus on:
- Maintaining diversification.
- Rebalancing if equities have grown above target allocations.
- Holding sufficient cash for stability and income.
- Keeping adequate liquidity for planned spending.
Here's how the major asset classes look:
Summary
This stage of the cycle would typically favour a balanced portfolio that can participate in further equity gains while being resilient if markets become more volatile.
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