Patrick Brenner, chief investment officer, multi asset, at UK-listed investment manager, sets out a cautiously optimistic stance at the start of a new year. The article highlights that Europe-based investment houses appear to remain confident in the US equity market.

After the sound and fury of 2025 with its tariffs and AI surge – it appears that wealth managers remain relatively cheerful about US equities, even though valuations are causing a few investment firms to feel queasy.

For example, Patrick Brenner, chief investment officer, multi asset at London-listed investment manager Schroders, continues to see a low risk of US recession in 2026, with the primary concern being the level of equity valuations. He is balancing his positive view on equities with diversifiers such as gold.

Echoing the stance of a number of his peers, Brenner remains positive on US equities, maintaining a modest overweight position. He believes that fiscal stimulus and lower interest rates support the market, unemployment is low, and recession risk remains limited. Other Europe-based investment managers such as Rathbones Asset Management also favor US equities in 2026. See more here.

In the UK, while valuations are reasonable, currency sensitivity and uncertainty over the UK domestic policy have led him to maintain a neutral stance. Brenner also keeps Europe ex UK neutral. “Market breadth is healthier and returns are less concentrated, but valuations are not cheap and the stronger euro is a mild headwind for exporters,” he said.

Neutral on Japan
On Japan, Brenner remains neutral. While the new government’s pro-growth agenda is compelling, the recent run-up in prices warrants patience. On global emerging markets equities, he has moved to neutral. While valuations remain favorable, the downgrade reflects a more moderated view on China, where the previous positive stance was largely driven by exposure to Chinese technology. Given rising concentration risks and a desire for greater cyclical balance across emerging markets, Brenner prefers to express emerging market exposure through a more balanced allocation.

China’s notably lower inflation forecast and mixed domestic activity has contributed to his move to a neutral stance. He prefers broader emerging market exposure to capture the artificial intelligence theme.

Brenner highlighted how Taiwan and Korea benefit from semiconductor and AI investment cycles but he remains mindful of tariff and policy uncertainty that could lift volatility.

Bond market
US bond markets continue to offer little value in Brenner’s view. Significant interest rate cuts are already priced into the front end of the curve and inflation expectations are muted. “This pricing contrasts with trends in other major bond markets where typically central banks are reaching the end of their rate-cutting cycle,” he said. He also sees little opportunity in US credit markets but is more constructive on European credit, leaving him neutral on credit overall.

He prefers European investment grade versus its US counterpart. Although valuations are similarly expensive, the macro environment in Europe is more supportive of the credit market. He remains neutral on US high yield.

Brenner is staying negative on government bonds which offer little value in his view. US bonds are already pricing significant rate cuts which looks premature given resilient growth and still-sticky inflation pressures. He expects yields to gradually climb higher as markets reprice to a less dovish policy path.

However, like other wealth managers, he holds a constructive view on UK gilts. With fiscal risks largely priced in, he expects the Bank of England to cut interest rates further. He remains negative on German bunds. “The outlook is challenged by higher household and fiscal spending, as well as increased long-end issuance, which is adding upward pressure to yields,” he said. He also remains neutral on Japanese government bonds. Fiscal expansion from the new government and a hawkish Bank of Japan are likely to push real yields further into positive territory. He is staying neutral on emerging market local debt, given mixed local fundamentals and fewer compelling valuations.

Gold
Despite recent market volatility, his positive view on gold is unchanged, with central bank and Chinese consumer demand remaining robust. He sees it as a diversifier in an environment marked by policy uncertainty, fiscal fragility and growing investor doubts over the long-term role of Treasuries and the US dollar.

Brenner has turned positive on commodities, driven by an improved outlook across energy and industrial metals. The reversal in his energy view reflects upside risks to prices, as supply constraints and policy developments are likely to support the sector. Gold remains his preferred diversifier.

Agriculture prices remained subdued, with a robust supply picture given higher US corn yields and record global wheat production.

On currencies, Brenner maintains a positive view on the euro, supported by widening liquidity and monetary-policy divergence, while the structural drivers of US dollar weakness remain intact. He maintains a neutral stance on the Japanese yen.

Overall, Brenner believes that cyclical risks remain relatively contained, but structural vulnerabilities – particularly AI circularity and concentration – are beginning to build. For now, he balances a positive view on equities with a diversifying position in international value stocks, a long position in gold and oil, and an underweight position in duration and in the US dollar.