Asset Allocation update - February 2026 | Columbia Threadneedle Investments

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients).

2026 has thus far seen geopolitical events, from Venezuela and Iran to Greenland, attracting attention. Headlines about tariffs and questions over the independence of the US Federal Reserve have continued. Still, financial markets remain resilient.

Solid economic data and strong earnings have provided support and the outlook for growth is improving, aided by fiscal stimulus. Monetary policy also appears favourable. Reflecting this backdrop, we have moved to further increase our overweight position in equities. Despite the prominence of geopolitical developments, these events have not altered the fundamentally supportive environment underpinning our positive outlook.

We remain constructive on the outlook for the global economy. After showing resilience in 2025, we expect 2026 to focus on extending the growth cycle. Global growth should be solid and from a regional perspective Germany is set for a notable rebound, driven by fiscal stimulus. China aims to meet its 5% growth target and US growth will likely match that of 2025, with scope for improvement if further stimulus is introduced. The UK is expected to grow modestly, though still below trend. Overall, the environment supports steady economic expansion and positive corporate earnings.

Looking ahead, we are optimistic for 2026. That said, we are mindful that much optimism is already priced in. This makes markets potentially more sensitive to policy changes, geopolitical events and disappointing earnings results, especially in sectors linked to transformative themes such as artificial intelligence (AI).

At a Glance - Equities and Fixed Income

Recent asset class changes and views

Asset Allocation Matrix

At a glance – equities and fixed income

Equities

We remain positive on equities. Our expectation is anchored around strong earnings growth in 2026, with US equities seeing broader gains, Japan delivering robust performance, and emerging markets showing improvement. While we recognise that valuations in certain regions and sectors are high, ongoing earnings momentum and supportive fiscal and monetary policies should help keep valuations elevated. Unless fundamentals or investor sentiment shift significantly, we believe equities remain the best way to express our positive outlook. As a result, we have upgraded our stance from ‘mildly favour’ to ‘favour’.

Fixed income

We retain a neutral view on bonds. Government bonds are volatile, driven by worries about debt and fiscal deficits. Monetary policy is supportive, with interest rates slowly falling, but Japan is raising rates, which brings some risk. Valuations in investment grade and high yield bonds are not overly compelling, and emerging market bonds offer historically low spreads.

Recent asset class changes and views

Japanese equities

We have upgraded our view on Japan to mildly favour. Both the economy and corporate earnings are gaining momentum, helped by a more stable political environment. Earnings growth is broadening and exporters are performing well. Fiscal policy remains supportive, with a new stimulus package announced. Although Japanese bond markets have been volatile due to the Bank of Japan raising rates and concerns about an expansionary fiscal policy, equities have not been significantly impacted. The upcoming election in early February could strengthen Prime Minister Sanae Takaichi’s position, easing the path for further reforms.

US equities

Given our more positive views on Japan and continued preference for emerging markets we have downgraded US equities to neutral. We see solid earnings and economic momentum, but valuations among the large cap companies are not compelling. Within the US, and reflecting our conviction in a US cyclical upswing, we are favouring small cap names over their large cap counterparts. Small caps offer greater value following recent relative underperformance and there is scope for outperformance against an improving economic backdrop.

Asset Allocation Matrix

Indicator guide
Use one of the following per cell:

o = coloured circle
u = up arrow
d = down arrow
ou = coloured circle with up arrow
od = coloured circle with down arrow

Use only the supported characters above to ensure the table displays correctly.

		DISLIKE	NEUTRAL	MILDLY POSITIVE	POSITIVE

Asset Allocation	Equity			o
	Rates		o
	Credit		o
	Property			o
	Commodities			o
	Gold		o
	Cash	o
Equity Regions	US		od
	Europe ex UK		o
	UK		o
	Japan			ou
	APAC ex		o
	EM				o
Equity Styles	Growth		o
	Value		o
	Quality		o
	Small Caps			ou
Fixed Income (*=Spreads)	Nominal		o
	Real Rates		o
	EM Local			o
	IG*			o
	HY*		o
	EM Hard*		o
Currency	USD		o
	EUR		o
	GBP		o
	JPY		o
	EM FX		o

Source: Columbia Threadneedle Investments, as at 20 January 2026. Change from last month

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Important information:

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). For marketing purposes.

This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.

In the UK: Issued by Threadneedle Asset Management Limited, No. 573204 and/or Columbia Threadneedle Management Limited, No. 517895, both registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.

In the EEA: Issued by Threadneedle Management Luxembourg S.A., registered with the Registre de Commerce et des Sociétés (Luxembourg), No. B 110242 and/or Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.

In Switzerland: Issued by Threadneedle Portfolio Services AG, Registered address: Claridenstrasse 41, 8002 Zurich, Switzerland.

In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA). For Distributors: This document is intended to provide distributors with information about Group products and services and is not for further distribution. For Institutional Clients: The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.

This document may be made available to you by an affiliated company which is part of the Columbia Threadneedle Investments group of companies: Columbia Threadneedle Management Limited in the UK; Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841. Columbia Threadneedle Investments (Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies.

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Important information:

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). For marketing purposes.

In Switzerland: Issued by Threadneedle Portfolio Services AG, Registered address: Claridenstrasse 41, 8002 Zurich, Switzerland.

Asset Allocation update – February 2026

2026 has thus far seen geopolitical events, from Venezuela and Iran to Greenland, attracting attention. Headlines about tariffs and questions over the independence of the US Federal Reserve have continued. Still, financial markets remain resilient.

At a glance – equities and fixed income

Equities

Fixed income

Recent asset class changes and views

Japanese equities

US equities

Asset Allocation Matrix

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