January is the month of good intentions, with no shortage of self-flagellation to choose from. Why not try Dry January to repair festive liver damage (or Damp January for weaker souls unable to go the full hog)? Or perhaps Veganuary - the noble sacrifice of all gastronomic pleasure in the pursuit of planetary salvation.
It does feel faintly masochistic to choose the coldest, most miserable month of the year to strip life of its few remaining joys. Fortunately, help is at hand with a far more rewarding New Year’s resolution: a review and refresh of your investment portfolio, and, unlike that David Lloyd membership, this one might actually improve your finances.
And this year, it matters. Investors hitching their fortunes to big US tech may have been richly rewarded but 2025 saw a clear shift, with US markets lagging emerging markets, Europe and yes, even the unloved UK. And if you need a final push, there’s just three months left to use your ISA and SIPP allowances to (legally) keep the taxman at bay.
So settle in with a juicy steak and glass of red (or kombucha and quinoa salad for the more virtuous) while we take you through the key ISA themes for the year ahead.
1. How to play the AI mega-trend
Top of the worry list is whether artificial intelligence (AI) will drive markets ever higher or if valuations have drifted into bubble territory.
For the pure-play winners, the vast scale of investment has shifted the debate from hype to profitability. Meta and Microsoft spent around a third of revenue on capital expenditure last year, more than double historic levels, with cash flow also taking a serious hit. It’s a marked departure from the asset-light model that previously defined big tech, with Apple (interestingly) sitting out much of the spending frenzy.
NVIDIA remains the clear leader in the AI chip race but competition is intensifying: Alphabet is in talks to spend billions on Meta chips, while Microsoft and Amazon are racing to develop custom in-house silicon. NVIDIA chips may be the Lamborghini of the pack - but with a price tag to match, rivals are increasingly incentivised to shop elsewhere.
So far earnings growth, not frothy valuations, has driven returns but many stocks remain priced-for-perfection. And Meta’s 10% post earnings drop highlighted how swiftly prices can reverse if momentum starts to ebb.
So where does that leave investors? Well, if you’re after a Route One index-tracker, the Xtrackers MSCI World Information Technology ETF offers a global spread from the Magnificent Seven to European leaders such as ASML, alongside a five-year return of 120%.
However, greater dispersion ahead may favour active strategies that look beyond pure tech. Landseer Global Artificial Intelligence does just that, investing in AI beneficiaries across the value chain including TSMC and Tencent, alongside a significant chunk in the Magnificent Seven. It’s a consistent performer, with a five-year return of 60%.
2. Can the UK continue to shine?
Self-deprecation may be a national sport but UK equities shrugged off the economic gloom in some style last year. The FTSE 100 hit record highs, comfortably outperforming its US counterpart.
Large caps led the charge, though they’re far more of a global than domestic play with just 20% of revenue coming from the UK. A heavy exposure to energy, consumer staples and financials has also kept income-seekers well catered for.
This performance is all the more striking given UK equity funds have endured a tenth consecutive year of net outflows. If the tide turns, particularly if investors rebalance their US heavy portfolios, these inflows could create a powerful catalyst.
Valuations remain compelling and overseas buyers have taken note, with takeover activity surging in 2025, often at a substantial premium to prevailing share prices. Meanwhile, small-caps continue to trade at deep discounts to their larger peers, setting the stage for a meaningful recovery if sentiment improves.
Artemis UK Select has excelled with a five-year return of more than 100%, thanks to strong calls on Rolls-Royce, Barclays and 3i. While the portfolio is currently skewed towards large caps, it’s able to invest flexibly across the market.
Rockwood Strategic (RKW) is another consistent outperformer in the small-cap universe, serving up a five-year return of 110% from its high-conviction, private equity style strategy. Success stories include SpaceX partner, Filtronic, which has risen by 2,000% over the last five years.
3. Commodities: a strategic diversifier
Gold’s record-breaking run has continued, rising from $2,000 to around $4,600 an ounce since early 2024. While geopolitics and falling interest rates have helped, central bank buying has been the real driver, as countries such as China trim dollar reserves amid sanction concerns.
Gold remains a useful hedge when equity or bond markets wobble and tends to shine during periods of geopolitical stress. However, forecasts of $5,000 by the end of 2026 suggest steady gains rather than more speculative frenzy.
But fear not, there’s no need to don rapper-style gold chains when the Invesco Physical Gold ETC can track the underlying gold price for you, delivering a five-year return of 140%.
For broader exposure, demand for metals such as copper and lithium should also surge as the net-zero transition and AI rollout gather pace. BlackRock World Mining (BRWM) provides diversified exposure to mining assets, with gold and copper currently the largest weightings, and has returned 100% over the last five years.
4. A new era for emerging markets?
Emerging markets weathered last year’s tariff turbulence to top the regional returns table, supported by a weaker dollar, falling oil prices and easing inflation. Despite the rebound, valuations remain attractive relative to both history and developed markets and volatility has been in line with the UK, US and Europe.
China, South Korea and Taiwan are global leaders in technology, with TSMC reigning supreme in semiconductor manufacturing and Tencent taking on the likes of Amazon.
Add youthful populations, a growing middle class, fragmented supply chains and the ability to trade with both East and West, and the long-term investment case looks pretty compelling.
Invesco Emerging Markets ex China has been a top-quartile performer, delivering close to 100% over five years through a contrarian focus on undervalued, durable businesses such as TSMC, Samsung and Indian banks.
Alternatively, Redwheel Next Generation Emerging Markets Equities looks beyond the Big Five to smaller emerging and frontier economies, offering higher growth potential, varied growth drivers and an under-researched universe. It’s also a top-quartile performer, with a five-year return of 160%.
5. Infrastructure: steady wins the race
The demand for infrastructure is vast, with megatrends such as digitalisation, decarbonisation, urbanisation and population growth expected to drive over $100 trillion of investment over the next two decades.
AI is putting unprecedented strain on infrastructure, from power to processing capacity, with major tech platforms now consuming as much electricity as mid‑sized countries. Infrastructure has become the classic ‘picks‑and‑shovels’ way to participate in the AI boom at far more attractive valuations.
But the sector offers more than just an AI play, it also provides defensive heft if equity markets fall, alongside an income stream, inflation linkage and the security of long-term contracts.
Options include the Lazard Global Listed Infrastructure Equity fund, a consistent performer with a five-year return of 75%. Its high-conviction portfolio aims to tap into attractive valuations across the utilities, transport and energy sectors in Europe and Asia (as well as the US).
Alternatively, Cordiant Digital Infrastructure (CORD) focuses on data centres, fibre and towers across the US and Europe. Although it hasn’t yet reached the five-year mark, it has delivered a three-year return of more than 50%, comfortably ahead of its 9% annual target, and is currently trading at a discount of over 20% to its underlying asset value.
Final thoughts
The outlook for 2026 remains a mixed bag: interest rate cuts should be supportive for equities but neither the US nor UK economies are going gangbusters and government debt continues to climb. And who knows what surprises Trump has in store over the coming months, not to mention a beleaguered prime minister on this side of the pond.
So think of diversification as your financial detox: spread your bets beyond the Magnificent Seven and you could avoid a potential portfolio hangover down the line. You never know, it might even fund a case of Chateau Petrus, or for the Greta Thunbergs among us, a year’s supply of Wonky Veg Boxes.
All data as at 12/01/2026 unless specified otherwise.
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