Wells Fargo investment strategists expect lower interest rates, tech-sector growth and international-stock gains in 2026
Wells Fargo Investment Institute’s outlook this year is all about tuning out the markets’ noise and staying anchored on the trends we expect to drive investments and the economy in 2026. Our top five portfolio ideas are intended to help investors stay focused on what matters for long-term growth.
1. Technology’s promise and productivity: In 2026, we expect artificial intelligence to expand into a broad-based catalyst for growth and expand beyond technology companies. Changes to economic and fiscal policy (like tariffs and tax cuts) and a smaller labor force are likely to encourage companies across various industries to improve productivity, in part by using AI.
As digital assets, autonomous vehicles, defense needs and industrial automation continue to grow, they will likely add to the increasing demand in infrastructure buildout and energy needs. We see investment opportunities emerging in the industrials and utilities sectors.
AI’s impact should continue to broaden across industries. Midstream energy, machinery, electrical equipment and data-center REITs are becoming critical infrastructure providers and operational support for AI expansion. Diversified banks should benefit from increasing demand for loans and other financing needs to support the increased spending on AI. Growth is also expected outside equities: Industrial metals will be needed for AI hardware and infrastructure, while private infrastructure and real-estate funds are well positioned to capture upside from data-center and energy-grid buildouts.
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2. Digital assets are a potential opportunity: Digital assets and blockchain technology are transforming finance, aligning with trends in AI, automation and next-generation payment systems. With the growing popularity of regulatory-approved crypto investment products, digital assets have become mainstream as an investible asset class, offering diversification and long-term growth potential. This is also a way to gain exposure to blockchain technology that enables secure, decentralized transactions and underpins the digital-asset ecosystem.
However, digital assets remain much more volatile than traditional assets like equities. Their prices also tend to move in the same direction as equities when monetary and fiscal policy push liquidity to extreme levels, as investors have seen in the years since the pandemic. Despite these risks, technological change and institutional adoption are expected to reinforce the utility and stability of digital assets. Continued education and awareness will support long-term investor interest.
3. Complement U.S. equity bias with international opportunities: While U.S. fiscal policy is driving economic growth and the U.S. stock market, global equity markets are becoming more competitive. Our current strategy maintains a home-country bias favoring U.S. equities and bonds, but we expect easing global inflation and lower U.S. interest rates to stabilize the U.S. dollar DXY and lead to lower borrowing costs in emerging markets. Emerging-market equities are shifting away from a manufacturing focus and toward growth sectors, and Asian nations are benefitting from China’s focus on developing its own technology and U.S. importers diversifying supply chains.
Production is expected to broaden globally, and increased defense spending and infrastructure rebuilding in Europe support including both developed-market ex-U.S. and emerging-market equity exposure in a portfolio.
4. Position for lower short-term rates: Short-term yields and money-market rates, though still above prepandemic levels, may not keep pace with U.S. inflation in key sectors such as healthcare, construction and education. For example, healthcare inflation is projected to reach 7.5%. As the Federal Reserve cuts interest rates, we favor diversifying income-generating assets within a portfolio and taking risk selectively, focusing on quality to preserve capital and position for growth.
For example, selective equity and fixed-income strategies can help bridge the gap between yields and rising costs. We favor U.S. large-cap and midcap stocks for their earnings growth and balance-sheet strength. In fixed income, high-quality investment-grade bonds, residential mortgage-backed securities and municipals are preferred. Private debt deserves caution due to stress in subprime auto lending; investors should monitor credit quality and avoid overexposure to vulnerable segments.
5. Harness the diversification power of alternatives and private assets: Alternative investments and private assets can offer investors downside portfolio protection while still capturing upside potential during rising markets. Private infrastructure, for example, is gaining traction as an income diversifier, supported by spending on business equipment and digital infrastructure.
Private equity is becoming an increasingly popular way to access fast-growing companies, especially those benefiting from fiscal stimulus and technological changes. Opportunities exist in growth-equity and infrastructure investments. Hedge funds, particularly merger-arbitrage and discretionary strategies, can reduce portfolio sensitivity to market noise, capturing upside while limiting downside. Because these are more complex investments, investors are encouraged to seek help from financial advisers and other investment professionals to determine the right alternative investments for their portfolios.
Michelle Wan and Veronica Willis are investment strategists with Wells Fargo Investment Institute’s Global Asset Allocation Strategy team. Wells Fargo Investment Institute Inc. is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank N.A., a bank affiliate of Wells Fargo & Company.
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-Michelle Wan -Veronica Willis
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