"Buy equities" - Why Alex Ventelon is risk-on for 2026

Please note this interview was filmed on 8 December, 2025.

US equities and gold are expected to shine in 2026, while returns elsewhere look far less certain.

That’s the key message from one of Australia’s most influential asset allocators, which expects 2026 to be another constructive year overall for risk assets, supported by a favourable macro backdrop.

Alexandre Ventelon, Head of Investment Strategy and Solutions at Morgan Stanley Wealth Management Australia, says the firm’s confidence rests on a rare alignment of supportive forces.

“What’s very unusual is this triumvirate of monetary policy, fiscal policy and capex expenditure in AI that are all going to be very supportive for the stock market,” Ventelon says.

That coalescing of forces, he argues, remains powerful enough to support equity markets for another year, with the US best positioned to benefit.

“We think fiscal is going to be expanding in the US - we saw that with the One Big Beautiful Bill Act this year - and that is going to continue into next year, alongside a few more rate cuts and an AI capex boom that is still in full swing,” he says.

That said, the outlook is not one of unqualified optimism. Growth is moderating, and parts of the US economy are losing momentum. That tension of strong tailwinds alongside slowing fundamentals underpins Morgan Stanley’s preference for selective risk-taking rather than a blanket “risk-on” stance.

Rates and bonds: flexibility over conviction

In Australia, Morgan Stanley does assume the RBA is locked into a prolonged pause.

Despite stronger than expected CPI, recent GDP data has undershot expectations, and uncertainty around labour market outcomes leaves room for policy easing if conditions weaken, particularly if a softer US economy drags global growth lower.

“The RBA could be very happy to bring interest rates back to where we think neutral is, which should be around 3.1%,” Ventelon says, acknowledging that for now interest rate risks are skewed to the upside.

For fixed income investors, this creates a challenging environment for high-conviction duration calls. Morgan Stanley expects yields to fall in the first half of the year before backing up later, making precise timing difficult.

“Investors would be well placed to be owning global bonds, global government bonds, especially in the US and Europe, where there’s going to be more probable rate cuts,” Ventelon says.

“And then continue to play floating rates in Australia and investment-grade credit as well.”

Credit: stretched valuations meet heavy supply

While Ventelon remains positive on equities, his enthusiasm for credit is more restrained. After a strong run, investment-grade valuations are stretched, with spreads already near multi-decade tights.

“Investment grade credit in the US… spreads going to the low seventies, which is extremely unusual - the lowest probably in the last 30 years,” he says.

The outlook is further complicated by the scale of AI-related financing expected to hit debt markets. Morgan Stanley estimates that around US$3 trillion in AI investment will occur over the coming years, with roughly half funded through debt, much of it flowing into investment-grade issuance. That surge in supply has materially altered the risk-reward equation.

“What we’ve done is we’ve downgraded investment grade bonds to neutral. 

“We’d rather take the risk within equities, and we are happy to hold a modest weight towards the high yield segment of the market,” Ventelon says.

Currency and portfolio construction

As portfolios tilt further offshore, currency management has become more important. 

Morgan Stanley has increased hedging levels as international exposure has grown, but Ventelon cautions against overdoing it - particularly as the Australian dollar approaches its expected longer-term range.

“Hedging too much would eat into the diversification properties of the portfolio,” he says.

REITs, commodities and alternatives

On listed property, Morgan Stanley remains cautious. REITs are treated as equities rather than alternatives and, as Ventelon notes, “they are very interest rate sensitive”. He expects an uneven year ahead, with select sectors, such as office, seeing some recovery but no broad-based rebound.

“We’re not expecting a massive jump up in rents,” Ventelon says.

Commodities remain a selective call. Near-term performance depends more on supply constraints than demand acceleration, with aluminium and copper better positioned than oil, where supply growth remains a headwind.

But gold stands apart, supported by central bank buying, geopolitical risk and ongoing concerns around fiscal discipline.

“There are still going to be geopolitical concerns, and they’re all supportive of the gold price — that’s why central banks have been buying so much of it,” Ventelon says.

“So we see value in owning gold next year. But on a risk-adjusted basis, if you want to be risk-on, it’s better expressed via equities rather than cyclical commodities.”

In alternatives, Morgan Stanley expects AI-driven financing to create a transition year for private credit after two strong years, with spreads adjusting to absorb heavier issuance. Private equity is seen as better positioned to benefit from deregulation, falling rates and a recovery in M&A activity.

Cash - and the key call

Cash still plays an important role in portfolio construction. With yields remaining attractive and volatility expected, Morgan Stanley sees value in maintaining liquidity to deploy during market pullbacks.

If forced to distil the 2026 outlook into a single allocation decision, Ventelon keeps it simple.

“It’s just buying equities and US equities. I don’t think it’s necessary to go into very exotic investments next year because we have the broad liquid market that should do the hard work for us ... simple, but hopefully efficient.”

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