Beyond the AI trade: where the next opportunities may emerge

Pacific Asset Management’s September multi-asset outlook argues that markets remain resilient despite higher energy prices and renewed inflation pressures, but suggests investors should look beyond an increasingly crowded AI trade.

Markets have entered the final part of 2026 with an unusual combination of resilience and uncertainty. According to Pacific Asset Management’s September 2026 multi-asset outlook, equities remain close to record levels despite higher energy prices, renewed inflation concerns and continuing geopolitical uncertainty. For the investment manager, the central question is increasingly whether the forces driving markets can broaden beyond the technology and artificial intelligence themes that have dominated investor attention.

Pacific’s multi-asset team argues that global growth remains reasonably robust. A softer consumer backdrop is being offset by continued investment in artificial intelligence, which is supporting corporate capital expenditure, semiconductor demand and earnings. That dynamic has helped markets absorb a series of potential setbacks.

At the same time, the investment environment has become more complicated. Pacific points to a reacceleration in inflation across the US, UK and euro area since the beginning of the conflict in Iran, while higher energy prices have added another source of pressure. The result, in Pacific’s assessment, is a world in which investors can no longer assume that central banks will simply continue the easing cycle that characterised much of 2024 and 2025.

Inflation changes the backdrop – Pacific highlights the renewed importance of inflation to asset allocation. Its analysis points to US inflation running above 3%, compared with 2.5% before the conflict, while inflation remains above target across several major developed economies.

The investment manager believes the key issue is whether this represents a temporary increase or the beginning of more persistent second-round effects. That distinction matters because the direction of monetary policy can have a significant impact on valuations across asset classes. For investors, a return to a higher-inflation environment potentially changes the relationship between growth assets, bonds and alternative sources of diversification. Pacific therefore argues that the investment environment needs to be considered in terms of both growth and inflation rather than relying on a single market narrative.

AI remains important, but concentration matters – Artificial intelligence remains central to Pacific’s assessment of the economic outlook. The investment manager sees AI capital expenditure as one of the principal engines supporting global growth, helping compensate for weaker consumer activity.

But Pacific also identifies a potential tension. The success of the AI investment cycle has attracted substantial capital, while some regional and thematic exposures have become increasingly crowded. That does not mean Pacific believes the AI investment cycle is over. Instead, its September outlook suggests that investors should consider how the benefits of AI spending can spread beyond the most obvious technology names.

The investment manager points towards emerging markets as one area where this broadening process is already visible. Korea and Taiwan, in particular, have become important beneficiaries of the infrastructure required by the AI economy. Pacific believes this has transformed the investment characteristics of parts of the emerging-market universe. However, the firm also acknowledges that some areas have become exuberant and says it has trimmed exposure to certain positions.

A preference for equities Despite the more challenging inflationary backdrop, Pacific remains constructive on equities. The firm says it has moved back to an overweight position after reducing risk during the most difficult phase of the Iran conflict. Its preference is particularly pronounced towards emerging markets and selected value opportunities.

This reflects Pacific’s broader argument that the equity opportunity set may be wider than the narrow group of companies that have dominated the AI narrative. For investors considering portfolio construction, that creates an important distinction between believing in the long-term economic significance of AI and assuming that every part of the existing AI trade will continue to deliver equally strong returns. Pacific’s approach is to look for areas where earnings growth, valuations and structural trends remain supportive.

Diversification becomes more important The other major theme running through Pacific’s September outlook is diversification. In a higher and potentially more volatile inflation environment, the investment manager argues that diversification across regions, investment styles and different types of assets becomes increasingly important.

Pacific specifically highlights emerging markets, alternatives and gold alongside equities as potential components of a diversified portfolio. The rationale is not simply to reduce volatility. Rather, the firm argues that different assets can respond differently to changes in inflation, interest rates, growth and geopolitical risk. That becomes particularly relevant when the market narrative is concentrated around a small number of themes.

Looking beyond the dominant narrative Pacific’s September assessment ultimately presents a market that is neither straightforwardly bullish nor bearish. Its view is that the resilience of equities reflects genuine economic support, particularly from AI-related capital expenditure and corporate earnings. But the investment landscape is changing as inflation returns as a central concern and some areas of the market become crowded.

The implication is that the next phase of the cycle may require investors to look more broadly. For Pacific Asset Management, that means maintaining exposure to equities while seeking opportunities in emerging markets, selected value stocks and other diversifying assets. The AI investment cycle remains an important part of the story. But Pacific’s analysis suggests that the more interesting question may increasingly be what happens around it and which companies, regions and asset classes benefit as the investment boom spreads through the wider economy.

Click Here to Read Pacific Asset Managements Multi-Asset – Investment Outlook – 2026: September Insights, 23 September 2026.