Investments in 2026: where not to invest

Any New Year's predictions are more for entertainment than strategy. If you have a significant amount in your portfolio—from $100,000—you definitely shouldn't rely on any predictions, even from the most authoritative market players. Statistically, such predictions are meaningless — they come true at random. Rafael Nagapetyants, senior partner at Movchan's Group, a private equity management group, believes that it would be better to take the opposite approach and say what not to invest in in 2026.

Stock indices in most countries are correlated, and they are ending 2025 at historic highs or with the highest growth in recent years. Such dynamics are possible for the fourth year in a row, but unlikely. More importantly, however, markets are growing disproportionately across sectors. More than half of companies are ending the year in the red, while growth is concentrated in IT sectors and, above all, the AI industry.

Accordingly, in order not to expose your capital to excessive risk, and in fact excessive volatility, it is not worth betting on indices and buying them in their entirety — this includes ETFs. It is better to rebalance your portfolio so that it is hedged against a stock market decline. This can be done by increasing the proportion of bonds versus stocks, either by using derivatives — if you know how to work with them — or by purchasing actively managed stock funds. Many of these funds outperform the market during periods of index correction.

Another highly sought-after strategy is to balance your portfolio of market-dependent investments with market-neutral ones. These earn money regardless of market movements and are very good at balancing your portfolio in the event of a fall in stocks and other market-dependent instruments.

The outgoing year was exceptionally successful for gold and weak for oil. But in both cases, it would be fair to say that it was highly volatile for commodities. In the case of gold, investors bet on the Fed easing its policy and inflation accelerating in the US, while in the case of oil and other industrial commodities, they bet on a slowdown in global economic growth.

Accordingly, in order to avoid another correction in gold and/or a sideways movement in oil prices next year, it is worth avoiding both equally. This also applies to indirect investments in commodities, i.e., shares of commodity companies and countries that are heavily dependent on commodity price behavior. The alternative is the same arbitrage or market-neutral strategies that do not depend on market sentiment.

In the past year, residential real estate markets have been weak. This is due to a cooling of demand after several years of growth. Moreover, there are signs that a structural crisis in the housing market in the US and Europe is ahead of us, when a significant portion of sellers will be "stuck" in their properties for years, unable to sell them with outstanding mortgages.

In these conditions, it is reasonable to look toward commercial properties, but again, not physical real estate, but rather more liquid, "paper" real estate in the form of funds, such as REITs. This is one of the few segments of the US stock market that has not been overheated during the rally of recent years, and it has interesting drivers, such as the replacement of office buildings in fund portfolios with data centers. At the same time, one of the main criteria for investing in REITs, which must be taken into account, remains liquidity and the presence or absence of a lock-up period, until the end of which investors cannot withdraw their investments at all.

The key trend of the outgoing year is the flow of global capital from dollar bonds to bonds denominated in alternative currencies, primarily those of other developed countries. This has led to a significant decline—about 10%—in the value of the US currency relative to the global basket.

According to the laws of the genre, such currency declines tend to reverse. This means that next year we may well see a reverse rebalancing, i.e., a return of global capital to dollar bonds — both the most reliable ones (issued by the US Treasury) and other securities across the market spectrum, including high-yield bonds. Therefore, it makes sense to increase the share of dollar bonds in your portfolio now, while the dollar is still relatively cheap.

Structured notes are one of the most popular instruments for investors with large capital: coupon notes with income linked to the performance of a dynamic asset, often an index or stock portfolio. Obviously, against the backdrop of the overall growth of global indices, many of them are ending the year with a healthy profit. But it is not worth drawing long-term conclusions from this.

Structured products are quite a tricky instrument. In individual securities, returns and risks are always stacked against the investor. However, it is possible to earn stable returns here too if you hold a broad portfolio of structured products. However, they are only available to a few investors, so it is probably better to consider investing in funds that, in turn, invest in structured notes and have greater opportunities for liquidity of their own shares.

Investing for one year is a very short time frame and, one might even say, a worrying one. If you plan to invest money for 12 months, i.e., no later than the end of 2026, it is best to put it in a deposit account or invest it in liquid US bills for three or six months. Also, keep in mind that banks that handle payments don't like it when you stop investments that are meant to be long-term without a good reason. This is because of rules about keeping track of money and preventing transit transactions.

Investing rarely "punishes" you for not having a forecast; more often, it punishes you for being too confident in your forecast.

Not an investment recommendation

This article was AI-translated and verified by a human editor