Discovery Invest: Why selectivity and discipline matter more in 2026

Johannesburg, 19 February 2026– Improving economic fundamentals in South Africa and other emerging markets are beginning to show a more favourable investment environment. Inflation has cooled meaningfully from post-pandemic peaks, while interest rates appear to have room to move lower. In this environment, it is critical to carefully choose investments, focus on value, and diversify with purpose rather than relying on broad market exposure alone.

“Looking ahead, investors need to maintain conviction and a long-term view," says Discovery Invest CEO Kenny Rabson. "They can’t rely on one market or one theme to carry portfolios; they need to think more globally, more thematically and more tactically. The backdrop should remain supportive for markets, but adaptive diversification will be central to investment success.”

Developed alongside expert views from the BlackRock Investment Institute (BII), and Ninety One, a global asset manager rooted in South Africa, the Discovery Invest 2026 Market Outlook explores the structural trends that are expected to shape markets.

The global outlook

2026 starts with the global economy on firmer ground as inflation moderates and monetary policy in major markets starts to loosen.

• United States: The Personal Consumption Expenditure price index is expected to fall towards ~2.5% year‑on‑year by late 2026, aided by softer rental inflation and more efficient supply chains. For investors, this suggests a lower risk of further aggressive tightening, supporting more stable equity and bond markets over the medium term.
• China:Its share of US imports has declined to below 10%, helping reverse earlier tariff‑driven price pressures. This could result in the re‑routing of global trade continues to benefit select emerging markets, particularly in Asia, while also reducing imported inflation pressures globally.
• Europe:Recession was avoided, inflation is edging towards the European Central Bank’s 2% target, and Germany’s fiscal expansion – especially in defence and infrastructure– could add around one percentage point to gross domestic product (GDP) across 2026 and 2027.
• Emerging markets:Many emerging markets are benefiting from strengthening currencies – including the rand – supported by improving fiscal discipline and a softer US dollar, with Asia showing particularly strong momentum.

Against this backdrop, Discovery Invest’s asset management partner, Ninety One, expects growth, rather than inflation, to be the main driver of returns over the next 12 to 18 months. Broad market gains like those seen in 2025 are unlikely to repeat, making valuation awareness and active positioning more important.

For South African investors, this could create a supportive but still nuanced backdrop, where a firmer rand, improving emerging‑market conditions and steady global growth strengthen the case for disciplined, well‑diversified portfolios that balance local resilience with global opportunity.

Mega forces reshape markets

Long‑term structural themes are becoming more influential in determining market leadership, even as traditional risks remain present. While global AI capex is expected to run between US$5 trillion and US$8 trillion over the next decade, not all beneficiaries are likely to deliver sustainable returns. According to the BII, periods of cooling are anticipated – and even healthy – as markets distinguish between companies building genuine economic value and those relying on narrative momentum alone.

The challenge for investors is identifying companies capable of converting heavy investment into enduring economic value.

Nevertheless, BII data suggests that if the tech sector increases its share of global revenue from 25% to 35%, it could add roughly US$400 billion in annual revenue.

As AI‑related investment accelerates, “Private markets will become a greater focus in portfolio construction for investors seeking long‑term structural exposure,” adds Rabson.

South Africa’s improving position within emerging markets

South Africa enters 2026 on a notably stronger footing than in recent years, supported by better fiscal discipline, improved governance and more reliable energy supply. The country’s removal from the Financial Action Task Force (FATF) grey list and the S&P upgrade have helped lift institutional confidence, while inflation is trending towards the South African Reserve Bank's (SARB) clarified 3% target, potentially opening room for interest rate cuts later in the year.

“For local investors, this has translated into stronger equity performance and more attractive valuations relative to global peers,” says Rabson.

Local markets have responded positively. Despite a strong 22% return in 2025 (excluding resources), South African equities continue to trade on forward price‑to‑earnings ratios below their 12‑year average and at a meaningful discount to global markets. This suggests further upside if reforms continue and global conditions remain supportive.

Ninety One maintains a favourable view on financials, precious‑metal producers and selected industrials, supported by stronger local fundamentals and a more favourable emerging‑market environment.

Diversification with intent

The Discovery Invest 2026 Market Outlook suggests that the global economy is more resilient and better anchored than in previous cycles. For investors, success in 2026 is likely to depend less on market timing and more on intentional diversification, valuation awareness and exposure to enduring structural trends.

Key investor takeaways for 2026:

• Global growth is expected to stabilise as inflation and rates ease.
• Mega forces could continue to drive market leadership, not broad beta.
• South Africa’s improving fundamentals support valuations and sentiment.
• Active management, global diversification and private assets are likely to gain importance.

“Short‑term headlines can obscure deeper shifts. What matters more are the structural forces reshaping global markets and the ability to stay diversified and aligned with longer‑term growth drivers,” concludes Rabson.

Click here to read the full Discovery Invest 2026 Market Outlook and risks worth watching in 2026.