New investment ‘regime’ in 2026 warrants active approach

Yasmine Raso

Senior Journalist, Financial Newswire

2 February 2026

The case for investors to adopt a more active approach in 2026 can count another supporter, with investment experts from Schroders pointing to several structural changes forcing a new “regime” for investors to face that “demands” a pivot towards selective asset allocation.

According to Head of Multi-Asset and Fixed Income, Sebastian Mullins, and Investment Director, Global Equity, Ben Arnold, the post-Global Financial Crisis (GFC) conditions of low volatility, low inflation and strong passive returns are falling away to a new investment environment that harks back to history.

Mullins said governments are intervening more in market outcomes via fiscal policy – replacing monetary policy – affecting defence spending, energy security, supply chain resilience and AI infrastructure investment and contributing to rising global debt levels.

“We’ve moved into a new investing regime, one with higher inflation, more government intervention and greater volatility. That’s not a short-term phenomenon, it’s structural,” he said.

“The invisible hand of free markets has been replaced by a very visible hand of government. That has far-reaching consequences for asset allocation. In this environment, inflation is likely to remain higher for longer, as governments seek to manage rising debt burdens through economic growth rather than fiscal restraint.

“Investors should think of fixed income as an income strategy rather than a source of portfolio protection in an inflationary environment. Bonds now pay you income, but they no longer provide the protection investors once relied on. Asset allocation needs to be far more dynamic.”

Arnold said investors must maintain a selective attitude even when it comes to opportunities in significantly high demand, such as artificial intelligence (AI), focusing more the “long-term winners” that boast real-world adoption and sustainable profit margins.

“The key question isn’t how much companies are spending on AI, it’s whether adoption and returns justify that investment. Adoption will ultimately determine which companies succeed and which fall behind,” he said.

“Lumping all mega-cap tech stocks together is risky. These are very different businesses with very different outcomes, and the market is becoming more discerning. Five of the seven Mag 7 stocks underperformed the broader US market last year, highlighting the growing dispersion within mega-cap technology.

“Lower correlations within mega-cap tech signal a healthier equity market and reinforce the case for active stock selection.”

Arnold also identified more niche yet stronger opportunities outside the US bubble, especially in Europe and some emerging markets.

“You don’t have to own US mega-cap tech to access growth. There are compelling opportunities across Europe and other regions that investors have overlooked in recent years,” he said.

Mullins said Australia represents a unique opportunity in that it is a mirror image of the US with its increasing likelihood of interest rate hikes to battle rising inflation, compared to the US’ easing cycle.

“Australia’s inflation challenge sets it apart from global peers. That has important implications for local interest rates and asset allocation decisions. With inflation still above target and employment running strong, the RBA has limited room to ease, making the outlook for Australian rates very different from the US,” he said.

“Investors can’t rely on old playbooks in this environment. With inflation higher for longer and correlations changing, portfolio construction needs to be more deliberate and more dynamic.”