The biggest opportunities in markets in 2026

You can watch the video by clicking the player, listen to the podcast, or read an edited transcript below. These interviews were filmed on 9 December 2025.

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Despite the noise, 2025 threw up plenty of opportunities for investors.

Anyone switched on enough to play the Resources rebound, the generational gold trade, the small cap surge, or even the CBA rally (before things cooled off) probably did pretty well for themselves. 

While many investors sat on their hands over AI and bubble fears, or licked their wounds following the Liberation Day correction, others took the chance to act and reaped the benefits. 

Fortune favours the bold, or at least those willing to think outside the box. So what are the big opportunities out there for investors looking to outperform over the next 12 months? 

As part of our 2026 Outlook Series, we asked nine leading fund managers to share the biggest investment opportunity they've identified for this year. 

Our featured fund managers include (in order of appearance):

• Matthew Booker, Spheria Asset Management
• James Abela, Fidelity International
• Steve Johnson, Forager
• Ben Griffiths, Eley Griffiths
• Alan Pullen, Magellan
• Arms Rosenberg, Minotaur
• Anna Milne, Wilson Asset Management
• Joel Fleming, Yarra Capital Management
• Tim Carleton, Auscap Asset Management 
• Dr David Allen - Plato Investment Management (written responses only - see below)

Note: We would like to thank the fund managers listed above for sharing their top opportunities for 2026 in the spirit of the Outlook Series. This list is not, nor is it intended to be, a set of recommendations. Please do your own research and seek advice from a professional before making any investment decisions of your own. Past performance is not a reliable indicator of future returns.

Edited transcript

1. Small caps

Matthew Booker: We strongly believe that small caps are the place to be. I know we're a small-cap manager, but if you look at the history of relative valuation, small-cap versus large, it's currently at a two-standard-deviation discount globally, small caps to large in terms of PEs. And so we think that's where the opportunity is. 

The reason I think that's come about is because of all this passive money that's come into the market, and it's issued, I guess, by small companies and micro-cap companies. And so it's kind of distorted the market and that means there's a lot of inefficiency down the market cap spectrum in terms of valuation. And the valuation, I guess, is where we make our money. 

If we can find companies that are undervalued, I think over time that's going to be recognised by the market, even though it's not in the short term. So the big opportunities are definitely in small caps, whether it's global or domestic, it doesn't really matter.

2. Sector momentum

James Abela: 2025 was a very strong momentum year. There was momentum in loss-making stocks, resources, growth and technology which presented a lot of opportunity. This was driven by earnings which continue to look quite strong in this market heading into 2026.

3. Recovery in software stocks

Steve Johnson: One factor that's been huge at the back end of 2025 has been the death of software theme. We've seen companies like Xero (ASX: XRO) and WiseTech (ASX: WTC) in Australia fall 40 and 50%, and that's been even more extreme in the US. 

I'm really happy to take the other side of that trade. I think there are lots of great opportunities out there in that sector, particularly in the US, for those software companies to overcome the concerns in 2026.

4. Materials and Resources

Ben Griffiths: Well, I think it'll be a continuation of what we've seen in 2025, and that's in the Materials and Resources sector. With the amount of energy transition construction and activity with data centre construction, demand generally for commodities is going to be strong and remain strong. And I think interest levels will remain very buoyant for commodity-type stocks. And that has great ramifications for 25% of the Australian share market, which is the Resources sector. So I think that will continue strongly. 

I'm not so worried about the fact that China is a stop-start recovery story. It's all about the Indo-Pacific Basin, and the strong growth we're seeing from economies like India, where we had about 6.5% GDP growth likely for this year, and looks like the same for next year. So I think we're in for a very buoyant commodities market, and Resource stocks will continue to do well.

5. Quality comeback

Alan Pullen: I actually think it's the rebound in quality investing. If you look over the really long term, quality companies have been shown to outperform the overall market fairly consistently over that long time period. But last year, we actually saw a lot of speculation in markets. Quality companies measured by a simplistic kind of metrics like ROE and so on, underperformed by about 9% last year. 

That's a pretty unusual situation, it doesn't tend to persist. We're thinking 2026 is likely to be the return of those quality companies where we're seeing some really good valuations as well in a fairly stretched market.

6. AI-dislocated companies

Armina Rosenberg: I think the biggest opportunity is going to be AI dislocations, particularly in software. So there's obviously been a lot of headlines around the mega caps and AI infrastructure plays on the whole AI front, but there's been a lot of opportunities created in software. 

Now, I think the baby's been thrown out with the bathwater because you've seen a lot of high-quality companies being markedly derated because people think that their business models are under threat from AI. With things like vibe coding and AI startups and the whole open source kind of infrastructure world, people are thinking that that's going to overtake some of these software names. 

If you take something like Atlassian (NASDAQ: TEAM), for instance, it's down 50% from its peak this year, and it's still doing revenue growth of more than 20%. It's got 3.5 million monthly users using its AI features. And the kicker is, companies that use vibe-coding software are actually seeing an increase in seats on Jira, more so than those that aren't.

So I think that there's a real opportunity in these high-quality, defensible, competitive moats that quality software players have in the whole AI world.

7. AU companies with US exposure 

Anna Milne: For the first time in years, we have cash rate divergence. We have hikers and we have cutters. Australia is now firmly in the hiking camp while the US is cutting, despite both economies actually looking pretty strong into next year. So then, when you overlay these monetary settings, we expect an acceleration in the US consumer and maybe a slight dampening in the Australian consumer. 

So how do we think about that from an ASX perspective? We're looking at Australian companies with US cyclical exposures or exposures to the US consumer. Now, this trend is slightly dampened by the Australian dollar. We do expect Australian dollar strength, but we think this trend will override that and it's under-appreciated by the market at the moment. 

Overall, I would say though, we are positive on the market. We believe the Fed sets the tone for risk assets globally and we have good global growth ahead. So we think equities can continue to rally from here.

8. Rotation into smaller stocks

Joel Fleming: I think 2025 was a good start of what should be a multi-year period just in terms of that rotation occurring - large caps starting to come back down into small caps and hopefully through time back into micros. 

And just that breadth opening up in the markets where investors are starting to look at parts of the market they've been ignoring for a couple of years. There's some really good value on offer - dynamic companies, nimble companies, growing companies, good valuations - just that whole view of that rotation and that money starts to filter back down.

9. Active managers

Tim Carleton: We think the real opportunity is actually in active management. It's obviously been a difficult couple of years for active in Australia and globally. The performance of passive industries have done particularly well. In Australia, the banks have performed exceptionally well. But going forward, the move to passive is actually creating a lot of volatility. And we think the volatility is going to be advantageous for genuinely active managers. 

So I think not just for 2026, but for the next decade, you're going to want to pick your most-trusted active manager and stick with them for the next decade, because a lot of the companies at the large end of the market, they're facing all sorts of competitive and revenue and earnings threats on a go-forward basis. So the real opportunities are going to sit outside the very biggest companies.

10. A return to value stocks

Dr David Allen: US technology valuations are stretched. Our analysis of the S&P 500 dating back to 1880 shows that current market valuations have only been exceeded once before — during the tech bubble of 25 years ago. That said, headline market multiples mask a significant amount of complexity beneath the surface.

Valuation dispersion — the gap between the cheapest and most expensive stocks in the market — is also at extreme levels. In practical terms, investors can buy Tesla at an eye-watering price-earnings multiple of around 240x, while Ford trades on just 8x earnings.

History suggests that such extremes rarely persist. Following the tech bubble, value stocks delivered their strongest relative performance since the Great Depression as valuation gaps mean-reverted.

Which opportunity have you identified for 2026?

Agree or disagree with the fundies or found your own opportunity for next year? Let us know in the comments below.