Most investments performed quite well in 2025 with no major category recording a loss. The outlook for 2026 in unclear with probably more to worry about than a year ago.

One important positive influence is that interest rates are still falling in several major economies including the US, Britain, and some European countries, though the European Central Bank’s rates may already have bottomed.

Declining rates are stimulatory for economies and businesses. They reduce borrowing costs for businesses and consumers, and help increase employment, provided inflation remains controlled. The latest figures show that the US economy is sound, and so is the Chinese economy.

Australia’s interest rate outlook is flat. Most economists think the RBA rate is at a neutral level and likely to remain there for some time. Bank term deposits now offer a moderate return.

Fortunately for Australia most metal and mineral prices are high. Rural commodity prices are also quite attractive at present. That’s good for our exports, income, and tax collections.  

The conflicts in Ukraine and Gaza have had little effect on investments and that is likely to continue. A Chinese invasion of Taiwan would be a serious problem but that is unlikely while President Trump is in the White House.

So far, Trump’s tariffs have had less effect than commentators expected. Markets simply adjust to the new arrangements and carry on. Producers find new markets for their goods. However the tariffs have added to US inflation and may do further.

Trump’s bullying over Greenland, and his interest in Venezuela should not have much effect on investments, other than oil prices perhaps.  

Some believe the big US technology companies developing AI are due for a crash. That is possible if they are priced too highly. However AI will be a major force in the future, and there have been reality checks and price retracements.

Taiwan Semiconductor, the world’s biggest microchip manufacturer, has just reported record sales and profits and raised its forecasts.

Australian and overseas shares have recorded three consecutive good years, causing fear a bad year may be due. Many shares are fully priced relative to profits, especially the big companies. So, while no major threat is evident gains may be modest this year.

Australia’s housing shortage won’t be fixed in 2026, keeping prices up. Direct commercial property should continue to recover this year after losses in 2023 and 2024, as rents are indexed up and workers return to the office. 

Investment prospects look reasonable in 2026 but no doubt there will be volatility.