YOU CAN'T PREDICT THE MARKETS, BUT YOU CAN PREPARE FOR THEM

Brian Arcese, Portfolio Manager at Foord Asset Management, explains how the Foord International Fund’s all-weather approach is positioned for 2026

If 2025 taught investors one thing, it is that preparation matters more than prediction. As portfolio managers, the goal is not guessing the next quarter correctly, it is about building portfolios that can withstand the periods when those guesses go wrong, while retaining the flexibility to act when opportunity appears, usually without warning, and rarely when it feels comfortable.

Twelve months ago, the most probable risk was a US economic slowdown. Housing activity was cooling, consumer credit was showing strain, and leading indicators were weakening. With US equities priced generously, the asymmetry was clear: investors did not need a recession to lose money. They only needed outcomes to be slightly less favourable than prices implied.

That slowdown has not arrived – at least not yet. US growth has proved sturdier than expected, supported by productivity gains and easier monetary conditions. Tariffs, a softer labour market and geopolitics have not vanished, but markets moved higher regardless. More important than the direction of returns, however, was their breadth. 

In a narrow market, concentration can masquerade as insight. In a broader one, crowding starts to look like risk and valuation discipline begins to matter again. In 2025, global developed market equities rose handsomely with returns far broader than had been the case over the prior two years. European equities bested US bourses for only the fifth time in the past two and a half decades, as a combination of fiscal and monetary support together with a weaker US dollar drove returns. Emerging market equities also outperformed US markets with a notable turn in Chinese equities, posting their first positive return since 2020. 

Though the Magnificent Seven again outperformed the US S&P500 excluding the information technology sector, the magnitude of outperformance narrowed. More importantly, four global sectors including industrials, utilities, materials, and financials, each outperformed the broader information technology sector and the concentrated Magnificent Seven cohort. 

Equally, for the first time in four years, returns outside of the US meaningfully drove global markets. In total, 40 countries’ bourses posted better returns than US markets in 2025 and we expect this broadening of returns to continue in 2026. 

Beyond equities, other asset classes also contributed meaningfully. Gold played its familiar role as portfolio insurance while geopolitical risk, currency concerns and volatility remained elevated. Fixed income did what it is meant to do in a diversified portfolio. It stabilised returns, preserved flexibility and provided optionality, rather than acting as a primary driver of performance. 

Against that backdrop, the Foord International Fund had its best year to date and is fast out of the blocks in 2026. We did not dramatically reposition the portfolio or suddenly take on more risk. Rather, last year validated an “all-weather” portfolio built to survive multiple regimes. Rather than depending on one macro call, or on a single crowded theme, an all-weather portfolio builds in optionality: holdings that can protect capital in adverse markets, and businesses that can compound when conditions are benign. It can look pedestrian at times, but this approach prevents the portfolio from being forced into bad decisions when markets misbehave.

Looking ahead, we expect global growth to remain relatively strong. Productivity gains, reduced tariff drag, tax cuts, and easing fiscal conditions are all constructive for US growth. The Federal Reserve is likely to continue its easing phase, particularly against a backdrop of decelerating inflation and weakening labour markets, though additional rate cuts are most certainly to remain data-dependent rather than pre-committed. 

Outside the US, absolute valuations are materially more attractive, though relative to their own histories many markets are no less expensive. Returns are likely to continue to broaden across geography, country, sector, and factor, highlighting the importance of diversification. In this environment, valuation discipline, balance sheet strength and portfolio resilience remain particularly important.

In short, 2026 should be a year of positive returns across equities and other risk assets, albeit more muted and volatile than in recent years. Opportunities are likely to be more dispersed across regions and sectors, placing a greater premium on diversification, valuation discipline and balance sheet strength. While alpha may be available for investors adept at stock selection, we continue to favour an all-weather portfolio that can capture these opportunities while delivering more consistent risk-adjusted returns.