Niamh Brodie-Machura, Chief Equity Investment Officer at Fidelity International, stated that AI has been a pivotal driver for markets, corporate earnings, and individual stock performance in recent years, with the trend likely to persist through 2026. She emphasized the importance of diversified equity allocations and highlighted income-generating and dividend-paying stocks.
Regarding China's market, Brodie-Machura noted that return on equity (ROE) has shown signs of improvement recently. Chinese AI models have demonstrated steady performance advancements while requiring significantly lower R&D investments compared to U.S. counterparts. This suggests consumers and businesses could access superior products and services at lower costs, positively impacting the economy.
She added that after years of volatility, earnings growth in Chinese equities has begun to rebound. Historically, long-term stock performance closely correlates with earnings, and many Chinese companies possess strong business models and expansive market opportunities. Furthermore, the conclusion of aggressive price wars is expected to support a recovery in corporate profitability, with broader bullish market indicators becoming evident.
Matthew Quaife, Global Head of Multi-Asset Investments at Fidelity International, highlighted AI as a critical growth driver globally, particularly in the U.S., influencing economic dynamics across sectors like employment. The AI trend now extends beyond directly related firms to businesses leveraging AI for productivity gains and earnings growth.
Quaife observed that globalization is evolving, with regional forces gaining influence, leading to more divergent trends in key areas like inflation. By 2026, he anticipates central banks will maintain supportive policies, with fiscal conditions in the U.S. and other regions remaining relatively accommodative. Despite elevated valuations in some markets, he expects positive returns, supported by policy tailwinds and anticipated Fed rate cuts.
Overall, Fidelity International projects robust corporate earnings in 2026, underpinned by AI adoption and favorable macroeconomic policies.