As we are well into 2026, it seems like a good time to put down some thoughts on what I see for 2026 and beyond. These are trends I think will happen, or are underway already, and what we’ll be looking to do to take advantage if they play out. I’ve broken it up into areas we’re following and how I see them playing out. TL;DR the world is becoming less unified and cooperative and that opens opportunities in areas that have been out of favor. More details below.
Macro Trends
Geopolitics: The US is increasingly reasserting the Monroe Doctrine. Russia has already invaded Ukraine and made its intentions known for Europe. China has long exerted influence on Southeast Asia and Africa with a combination of wolf diplomacy and the Belt and Road initiative acting as their carrot and stick. With the world split up into three major spheres of influence, there are more transactional interactions between nations and less trust. Institutions previously seen as nonpartisan and part of the “plumbing” of how nations interact are increasingly being weaponized, with the first major example being the freezing of Russian assets in response to their invasion of Ukraine and the most recent being the curbing of rare earth metal exports by China. Supply chain disruptions, tariffs and export restrictions - this breakdown of cooperation between nations has prompted new trends away from the fixation on efficiency and just-in-time supply chains to drive down costs to a new emphasis on resilience and independence.
Building, or rebuilding, secure, controllable supply chains has become an existential issue for many nations. Some likely downstream consequences of this new focus are less efficiency, higher costs and lower margins. This brings with it opportunities in the form of geographic arbitrage, volatility in FX and siloed or parallel supply chains for resources. Our thesis is that this restructuring of trade patterns and supply chains to a less interdependent world will embolden those seeking conflict. It will provide a ready excuse under the guise of securing resources, as the US recently did with Venezuelan oil. It will also make the international community less able to impose meaningful consequences like sanctions. This new world of siloed supply chains will take time, money and political will. And since building out these solutions could be an existential question for nations and regional powers, they will likely be largely price insensitive. This, plus the move from more to less efficient processes, will encourage securing resources to not only meet national needs, but also in part to deny them to rival powers. All of this will lead to a structural shift to more expensive commodity prices and a structurally inflationary world. We see the build-out of these new trade infrastructures as a major catalyst for a new commodity and industrial bull market. This likely increase in demand will come up against a prolonged period of underinvestment in the infrastructure for location, extraction and refining of natural resources.
Ex-US markets: What about emerging markets? This is the obvious question. What does this mean for investment? We think that there will be several major themes that will manifest over the near to medium term. Some of which are already underway. An example is the recent outperformance of ex-US markets, particularly EM. We feel this trend has legs for two reasons. First, the “sell America” trade. While we do see some rotation out of tech names, we don't see much money leaving the US. We still think that ex-US will outperform. Why is that? We feel that geopolitical and trade barrier pressures will prompt some movement to reshore foreign capital. This coupled with the relative value of ex-US stock markets compared to the very high valuations of the US market will prompt at least some of the foreign capital that would historically have gone into US equities to go to other markets. The thing to keep in mind is that there are no financial markets as large or as liquid as the US market. If even a small percentage of a large pool were to go into a much smaller and less liquid market, that market would easily outperform. The amount of capital needed to push a small market up 10% is much smaller than the amount of capital needed to push a much larger market up even 2%. While we do think the US market will have positive returns this year, we feel that it will still do "less well" than other markets.
The second reason is that ex-US are weighted towards “real assets”. We feel the renewed focus on energy, both renewable and non, to power LLMs along with the need for commodities to build out the siloed supply chains described earlier will keep earning strong for “real asset” based economies. A good example is the performance of EWZ in the past 12 months. Southeast Asia, Africa, and South America still have generally favorable demographics. They also have large reserves of natural resources and a ready source of labor. We believe these are the very forces driving the return of regional spheres of influence to secure these resources for the existing global powers. These are also regions of the world most likely to suffer the brunt of now irreversible climate change. These regions' coming environmental challenges and subordinate position in the likely global order make us skeptical that large amounts of capital will be allocated to their needs or concerns.
Technology: AI is taking over the economy but have high conviction that the spend in this sector will not provide the ROIC increase commensurate to the large amounts of capex on build out. Our view is that the data centers and LLM’s will be essentially commoditized and the real AI winners will be the companies built on top of that infrastructure. Like mobile, social media, and search being built on the bones of the telecoms from the dot com bubble that built out the cable networks and foundations of the internet. While it’s impossible to know who the winners will be in an AI world, we can target broad sectors that will be essential to its proper functioning. One such is cybersecurity. AI will make cyber-attacks more common and devastating, it will also enable better security and protection of systems. Holding a broad basket of data security names is a wise move either through individual securities or a basket of ETF’s. The other area that is more speculative but potentially transformative is Quantum Computing. The fundamentally different computing paradigm would be much more powerful than existing silicone-based compute. If the need for energy becomes dire enough a focus on quantum computing would potentially create less power hungry and more powerful AI models as well as disrupting the cybersecurity space as quantum computing could render much of modern cryptography obsolete. While the technology is in its infancy and barely useful, there are only a few major players that are not private and owning them all individually or via an ETF is easily done.
Energy: Alongside the build out of this new technological landscape we also need to consider what the second and third order consequences of a move into an AI world are. The most obvious question is “how are we going to power this?” Personal computers and even previous generation server farms and data centers seem antiquated in terms of sophistication as well as power requirements. AI data centers need city level power supplies and the current infrastructure outside of China is ill equipped to support these needs. One of two paths are available to nations that want to be able to support the upcoming energy demands. There can either be massive public infrastructure spending to upgrade, expand, and modernize energy grids at a national level, or individual data center owners can develop site and demand specific technologies to power individual centers or clusters of centers. Current political polarization and de modernization of energy policy make the latter option more likely. We are already seeing individual companies signing power deals as well as investing in SMR technology. Carbon based energy will continue to be used as the transition to other forms happens in fits and starts. This implies a need to look at both investing in traditional energy in the medium term and evolving technologies for the long term.
The US seizing control of the Venezuelan oil resources is an example of the US not only looking to expand its sphere of influence, but also to secure control of “traditional” energy supply. As China is the leader in renewable energy production, the US looks to be securing its position as the carbon-based energy leader. Looking at oil exploration and refining instead of large multinational oil companies, as well as LNG refining, transport, and storage seem like winners regardless of oil prices and production capacity. These are essential and rate limiting steps to carbon-based energy use and are good bets for medium term investment. Longer term views make investing emerging technologies around nuclear and renewable energy and energy storage a good bet. In these, nuclear power seems to have hit a low in terms of sentiment and demand and turned a corner. While there will surely be volatility in markets for this technology it seems the most likely winner in the long term and I would suggest focusing much of the allocation to this area to nuclear fuel, R&D, and transmission. Battery storage to help even out demand surges as well as improving as a technology for EV a good area of investment both over the medium and long term. As with any evolving or emerging technology it is difficult to pick winners so broad investment in the sector with an eye towards investing in the inputs needed, regardless of winners is a safe course. For example, no matter who produces or uses LNG, pipelines and tankers to transport them will do well, regardless of which LNG produces are the winners. For nuclear, no matter the technology, scale, or implementation, uranium in some form and in some level of refinement will almost certainly be needed.
Materials/Mining/Industrials: All the technologies mentioned will require critical inputs that can only be obtained via mining. Rare earth elements and lithium for chips and batteries, uranium for SMR’s and city scale nuclear reactors, copper for wires, steel and aluminum for cases, racks, cars, etc. All require digging and mining operations to acquire. Companies that focus on mining and refining (especially rare earth minerals and uranium) will become increasingly essential to keeping the development of technology moving along. We think this is one of the major drivers of recent geopolitical moves as described above. While there will no doubt be major winners they are difficult to identify without significant expertise. The easiest way to invest this area is to buy a basket of ETFs that provide broad exposure to the sector while supplementing with “moonshot” companies that will likely die but hold the potential for outsized gains. This allows a broad, diversified base while adding small bets that, if even a few hit, can turbocharge returns.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual.