Long-term investing strategy - Why "boring" is back in style after the big market shift of 2025

As we reflect on 2025 and look ahead, a clear theme has emerged in global markets: the era of narrow, concentrated leadership is giving way to broader participation. While artificial intelligence and technology continue to advance, investment returns are now coming from a more diverse set of regions, sectors, and companies. This evolution represents not a retreat from innovation, but rather a maturation of market dynamics.

Here’s what we’re observing and what it means for your long-term investing strategy.

The expanding investment landscape

Markets concluded 2025 with resilience and have entered 2026 with characteristic volatility. Underlying this movement, however, are fundamentally positive conditions: corporate earnings continue to expand, major global economies demonstrate unexpected durability, and investor attention has meaningfully widened beyond a handful of U.S. technology names.

This broadening represents a healthy market development. Dependence on a single sector or region increases vulnerability, whereas diversified sources of return contribute to more sustainable long-term investing strategy.

Seven themes defining the current environment Long-term investing strategy.

1. The case for global diversification strengthened

In 2025, international equity markets - particularly in the United States, Europe, and Japan - delivered standout performances. In contrast, New Zealand and Australian shares faced headwinds from softer domestic growth and comparatively higher interest rates. This dynamic served as a practical reminder that geographic concentration can be a limiting factor, while global exposure provides access to different economic cycles and opportunities.

2. AI’s second act: The scrutiny phase

Artificial intelligence remains a powerful market force, but the narrative has evolved. The initial phase, driven by infrastructure and hardware spending, is being followed by a more discerning evaluation. Investors are increasingly distinguishing between companies making substantial AI investments and those demonstrating a clear path to monetization and profit. This necessary scrutiny introduces short-term volatility but supports more sustainable long-term valuations.

3. The resurgence of traditional sectors

Last year witnessed strong performance from established sectors such as finance, industrials, consumer staples, and utilities. The milestone of the Dow Jones Industrial Average reaching 50,000 was symbolic of this shift, reflecting confidence in the broader, diversified U.S. economy. This resurgence highlights that value and growth can coexist outside the technology sphere.

4. International markets reclaim attention

A significant rotation has occurred toward markets outside the United States. Europe, Japan, and select emerging economies, including India, have outperformed, driven by attractive valuations, proactive policy support, and improving relative growth prospects. India’s notable performance, bolstered by a major trade agreement with the U.S., underscores how geopolitics can create tangible investment opportunities.

5. Diverging monetary policies

Global central banks are no longer moving in lockstep. While the U.S. Federal Reserve and European Central Bank signal a potential shift toward rate cuts later in 2026, the Reserve Bank of Australia recently tightened policy to address persistent inflation. New Zealand’s economy shows a mixed picture, with soft domestic data tempered by early signs of stabilisation in key export sectors. This policy divergence reinforces the importance of a globally diversified fixed-income strategy.

6. Bonds regain their defensive role

After a period of correlation with equities, high-quality bonds have reasserted their traditional role in portfolios. They are once again providing predictable income and acting as a buffer during equity market stress. Although global sovereign bonds outperformed their Australasian counterparts last year, current yields in local markets are beginning to offer compelling value for income-focused investors.

7. The strategic role of precious metals

Renewed interest in gold and silver reflects a desire for portfolio hedges against a weaker U.S. dollar, persistent geopolitical friction, and lingering inflation concerns. While prices are subject to short-term fluctuations, these assets are re-establishing their historical role as diversifiers that can perform during periods of broader market uncertainty.

Portfolio implications: What worked and what didn’t

The recent environment rewarded several disciplined approaches:

• Maintaining a strategic global asset allocation

• Remaining invested through periods of volatility

• Holding exposure to both cyclical and defensive sectors

• Utilising balanced, multi-asset portfolios designed for various market conditions

Conversely, more concentrated strategies faced challenges, including over-reliance on domestic equities, chasing highly-valued thematic investments, and underestimating market variability.

Navigating the path ahead in 2026

As we progress through the year, we advocate for the following principles for a robust long-term investing strategy:

1. Maintain a long-term perspective. Economic and corporate fundamentals remain sound, but markets will likely continue to exhibit volatility. A focus on long-term objectives is crucial.

2. Prioritise strategic diversification. Future returns are increasingly likely to stem from multiple sources - across geographies, sectors, and asset classes.

3. Be selective within major trends. AI is a transformative, long-term trend, but selectivity and focus on fundamentals are paramount as the industry evolves.

4. Look everywhere for opportunity. Attractive potential exists in both innovative and traditional businesses, as well as in developed and emerging international markets.

5. Trust in your plan. This environment rewards patience, discipline, and a well-constructed financial plan over speculative short-term decision-making.

At Naked Finance, our portfolio construction has always been predicated on the power of diversification. The current market broadening aligns with our core philosophy of building resilient portfolios designed to capture global growth while managing risk.

If you have questions about how these themes or would like to chat to the team about your investment portfolio, book a meeting with a Naked adviser.