With 2025 coming to a close, a few of Perpetual’s portfolio managers offered up their perspectives on what this year has taught them and what might be worth keeping an eye on in 2026.
- AI and resources dominate 2026 outlook
- Value stocks and volatility create opportunities
- Find out more about Perpetual’s strategies
AI and construction
It’s no secret that artificial intelligence has been a big theme in recent years, and it has continued to garner interest in 2025.
The evolution of AI is something Nathan Hughes, portfolio manager of Perpetual’s ESG Australian Share Active ETF (ASX:GIVE), is keeping a close eye on.
“We’re looking more now at how companies are starting to implement AI,” notes Hughes.
“In 2025 people were treading gently and starting to have a bit of a think about it, but adoption picked up quite a bit in the back half of 2025.
“I’m interested in watching that evolution into 2026, particularly what it might mean for productivity savings or cost-out – not necessarily jobs going, but efficiencies and productivity and being able to do more with less.”
Another point of focus in 2026 for Hughes is the improving landscape in building approvals and how that will play out for companies such as fixtures-and-fittings supplier GWA Group (GWA).
“In the domestic market we have seen building approvals probably trough and start to improve, and so we think that will lead to better volumes,” explains Hughes.
Improvement in the US building market, meanwhile, is expected to pick up in the next 12-to-18 months.
“A stock that might benefit from that would be Reliance Worldwide (RWC). It would benefit from improving activity in Australia, but also the US and the UK,” says Hughes.
Value investing
Over the past couple of years many investors have favoured growth and momentum stocks – companies that are trendy or expected to grow fast – even if their current earnings are not that strong.
Meanwhile, value stocks – companies that look under-valued or are facing short-term earnings challenges – have been overlooked.
But there are indications this trend is shifting, says Sean Roger, co-portfolio manager of Perpetual’s Pure Equity Alpha and SHARE-PLUS Long-Short funds, as well as ASX-listed Perpetual Equity Investment Company (ASX: PIC).
“There's some signs that fundamentals are starting to come back into vogue a little bit, where some of the recent winners have been sold off quite materially and some of the laggards have started to show signs of life,” argues Roger.
“If we get a platform into next year where fundamentals come back into vogue, we'd be pretty excited by that because a lot of our portfolios are set up in stocks that fundamentally have got a lot of valuation support, and we're being compared to an index that has a lot of stocks that are very overvalued relative to history.”
Volatility creates opportunity for active managers
Another trend Roger will be looking out for in 2026 is volatility, which can be an advantage for long-short funds.
“While some people in the market may not be a fan of volatility, it can create a lot of opportunities for funds that have the ability to make money in different ways,” explains Roger.
Stocks that are on his radar include Australian steelmaker BlueScope Steel (BSL), New Zealand logistics company Mainfreight (MFT) and diversified investment house Soul Patts (SOL).
“New Zealand is a bit further down the interest rate cutting cycle, so I think there's some signs of life over there,” says Roger.
“Soul Patts is very well capitalised, so they're very well placed to take advantage if there's any volatility, and the valuation looks pretty attractive.”
Another sector to watch in 2026 is resources.
“The resources sector in aggregate, I think, looks pretty compelling relative to banks and financials. Valuations are cheap and the underlying commodities prices are improving as global growth continues to stabilise and tick up a little bit,” says Roger.
Australian credit offers global upside potential
Australia, meanwhile, is demonstrating greater upside with respect to investment grade credit than the US or Europe, according to Vivek Prabhu, Perpetual’s head of credit and fixed income.
Prabhu manages Perpetual Diversified Income Active ETF (ASX: DIFF) among other funds.
“One of the big themes over the course of this year has been how tight credit spreads are, which are basically the extra credit yield premium you’re getting for being exposed to potential default risk,” Prabhu explains.
“So those credit yield premiums currently are at 27-year lows in investment grade credit in the US and they're at 17-year lows for investment grade credit in Europe.”
By comparison, Australia is now offering credit premiums slightly higher than the post-GFC lows of 2021.
“So Aussie credit is looking pretty attractive in a global sense,” notes Prabhu.
At this point in the cycle, it makes sense to take a bit of risk off the table, he argues.
Perpetual’s Credit and Fixed Income team has been reducing its exposure to foreign denominated bonds over the back half of 2025 from between 25 and 30 per cent to around 10 per cent.
“The reason for that is just acknowledging how expensive investment grade credit is historically in the US and Europe and banking those profits and then rotating back into Aussie credit, which still has some upside left relative to our post-GFC lows,” concludes Prabhu.