Robeco: Fragility beneath the surface will create opportunities in 2026
19 JAN, 2026
By Colin Graham
By Colin Graham, Head of Multi Asset & Equity Solutions at Robeco
This year, investors will need to be selective, as equities and metals may face a correction after a prolonged period of euphoria.
In the first quarter of 2026, the global investment landscape is shaped by a striking paradox. Unprecedented technological progress is masking structural weaknesses across the broader economy, including persistent inflationary pressures and fragility in the manufacturing sector.
While indices such as the S&P 500 are trading at all-time highs, the broad-based rally following last April’s so-called “Liberation Day”—when President Trump announced new tariffs—has left markets vulnerable to a sharp reality check.
Metals under the spotlight
It is not only equity markets that have reached new highs. Gold prices have also hit record levels, surpassing USD 4,000 per ounce, driven by ongoing geopolitical tensions and strong central bank demand. Silver, meanwhile, has surged as supply struggles to keep pace with expected future industrial demand.
Precious metals have delivered diversification and performance, but the recent rally in silver—up 30% in 2025—epitomises current market instability. While industrial demand from solar energy and 5G remains strong, silver prices have become detached from fundamentals.
By contrast, gold continues to stand out as a top-tier hedge. Central bank demand is projected to remain four times higher than pre-2022 levels, making it a key factor to monitor this year. Investor interest via exchange-traded funds (ETFs) has risen sharply for both metals: 22% of the 220,000 tonnes of gold mined is now held in gold coins and gold-backed ETFs—exceeding central bank holdings.
As a result, the performance of precious metals is increasingly driven by financial positioning, implying continued volatility and technically driven trading.
Chinese AI looks promising
US technology remains dominant in terms of narrative leadership in large language model (LLM) development. However, 2026 is likely to be a year of rationalisation, potentially leading to a “growth scare”, as hyperscalers are forced to justify the trillions of dollars in capital expenditure they are committing.
China, by contrast, is winning the race in applied AI. By focusing on reducing unit costs in manufacturing and logistics, Chinese AI is already contributing around 1% to GDP growth. From our perspective, we have not ruled out Chinese equities that stand to benefit from AI deployment, particularly in industrial automation.
Equity market fatigue
Can we say that the current equity rally—now more than three years old—is nearing its end? Historically, the S&P 500 posts four consecutive positive years only once per decade, typically either entering a bubble or emerging from recession.
Professional investors should be wary of the growing influence of retail investors, many of whom have accumulated wealth through low-cost ETFs, drawn in by steadily rising equity prices and expectations of an AI-driven bubble.
This shift in ownership towards price-sensitive retail and tactical investors has increased market fragility. US equity ETFs now hold approximately USD 8.2 trillion in assets, with more than 40% influenced by retail flows (including fee-based advisors).
We are already witnessing signs of “retail investor fatigue”, with net flows turning negative for five consecutive weeks, indicating that the “buy-the-dip” mentality is fading. This is compounded by a sentiment gap: fund manager surveys show high levels of investment exposure, even as conviction grows that markets may be experiencing an AI bubble—raising the risk of a crowded exit.
US midterm elections
US midterm elections will take place this November, with all members of the House of Representatives and one-third of the Senate up for election. Since 1961, US equity markets have tended to struggle during the first three quarters of congressional election years, before rebounding in the fourth quarter.
This pattern is illustrated in Figure 1, where 2026 represents the second year of the current presidential cycle. This year may therefore be less calm than widely expected.
Liquidity is no longer king
Finally, it is important to note that liquidity levels have declined, while enthusiasm for AI has driven higher leverage. Global cash balances have fallen to a precarious 3.7%, a level that has historically preceded significant equity market drawdowns.
Equity markets continue to trade on the basis of AI-related earnings growth and technical factors, rather than valuations.
During these volatile phases, we will rely on our multi-asset investment process, analysing fundamentals to assess whether our outlook needs adjustment—whether on corporate earnings or the path of interest rates. This will determine whether we buy risk assets on weakness or step back to build a more defensive portfolio. Time will tell.
