ETF strategies for 2026

Despite predictions that equities would fall in 2025, international equities, buoyed by the boom in AI, finished 2025 much higher than they were at the end of 2024, despite a significant drawdown after ‘liberation day’. Gold was a standout, ending the calendar year over 50% higher than its price at the start of the year, finishing above US$4,300.

Looking ahead, the US midterms will headline 2026, as well as inflation, Fed cuts (and who will be made Chair).

Below, we share six charts that support:

• A potential flight to quality;
• Emerging market outperformance; and
• Continued gold price momentum.

AI may not be enough to hold up American growth

2025’s US growth has been heavily relying on AI. However, optimism centred around data centre expansion is likely to be limited in 2026 as valuation concerns become increasingly dominant. In the last quarter of 2025, we have seen speculative assets come under pressure as sentiment cooled. This trend could continue into the new year, bringing back market volatility.  

Chart 1&2: US GDP & Corporate CAPEX

Source: Bloomberg. Real GDP growth ex AI covers real GDP growth excluding information processing equipment and software investment. Bureau of Labour Statistics and Bureau of Economic Analysis. Data as of 30 June 2025 due to data availability. Right chart data as of 31 December 2025.

In addition, elevated tariffs have contributed to higher business input costs. If this is passed on to consumers or companies reduce margins it could further intensify the ‘flight to quality’.

Chart 3: A ‘flight to quality’ amid uncertain times

Source: VanEck, Bloomberg. Performance in AUD. Data as of 31 December 2025. MSCI World ex Australia Quality Index. MSCI World ex Australia Index. Past performance is not indicative of future performance.

US dollar is positioned for further weakness

If history is any guide, the US dollar down cycles, once started, tend to extend beyond a few months. Looking into the new year, we think a macro environment will be increasingly defined by subdued growth, elevated US government indebtedness and easing monetary policy. This is likely to lead to a prolonged US dollar downturn. Furthermore, the US dollar’s share in total allocated international reserves has fallen to the lowest levels since the mid-1990s, reinforcing a broader shift away from dollar dominance.

Chart 4: US dollar vs global USD reserves

Source: Bloomberg. Data as of 31 December 2025.

From an investment strategy perspective, 2026 could be a good year for classic dollar “hedges”. Think emerging market assets and gold.  

Chart 5: Emerging market equities have outperformed in dollar down cycles

Source: VanEck, Bloomberg, CPB, IBES/DataStream, MSCI, NBER. Data as of 31 December 2025. Past performance is not indicative of future performance.

Chart 6: Gold has shown strength and resilience

Source: Bloomberg. Gold price is LBMA Gold Price in USD. Data as of 31 December 2025.

ETF ideas for 2026

Key risks

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