Equity Trustees Asset Management is anticipating a moderation in investment returns in 2026, according to Chief Investment Officer Darren Thompson. He attributes this outlook to high equity market valuations and less aggressive monetary policy easing than previously anticipated. Equity Trustees Asset Management provides a range of specialist investment, trustee, and fund administration services to individuals, families, and corporations. The company manages investments across various asset classes, including equities, fixed income, and property.
Thompson cautioned that any unexpected increase in inflation could derail plans for interest rate cuts and reverse recent rallies in rate-sensitive sectors. He noted that the Australian market is particularly vulnerable, as local inflation could limit the Reserve Bank of Australia’s (RBA) ability to cut rates. This could negatively impact sectors that have benefited from the anticipation of lower interest rates.
Income remains a concern, with Thompson forecasting ASX dividend yields of approximately 3.2 per cent next year. This figure is significantly below the long-run average of 4.4 per cent. However, he anticipates a slight increase in local dividends by the end of the year, marking the first period of growth in some time.
Despite valuation concerns, Thompson highlighted potential value in sectors such as healthcare and in regions including Europe and emerging markets, supported by stronger earnings expectations and productivity gains. He anticipates offshore-exposed industrials will drive the ASX, boosted by high commodity prices, while bank earnings remain subdued, and domestic cyclicals face potential headwinds from a paused RBA rate-cut cycle.
