This article was originally published on Stuff on 9 November, 2026.
Experienced investors spend a lot of time worrying about what could go wrong. But one of the most interesting features of markets in 2026 is not what has happened, but what hasn’t.
Should investors be worried about AI-related market concentration? Geopolitical conflict? Oil and supply chain risks? Stubborn inflation? What about rising government debt and elevated bond yields?
The answer to any of those questions may be yes. Yet through them all, global sharemarkets have kept on moving higher. Today’s elevated risks are not especially unusual, but it is striking how consistently equity markets are looking through them.
Global shares returned 24%, 19% and 22% across 2023, 2024 and 2025, and are up a further 13.4% this year to the end of August, according to MSCI.
History suggests such a four-year run is unusual, but what’s perhaps more unusual is what investors have navigated along the way. Trade tensions re-emerged through successive rounds of sweeping, often erratic tariff announcements. Russia’s war on Ukraine has continued to reshape energy, commodity and security markets. Conflict in the Middle East continues to raise concerns about global oil supplies and the risk of broader regional escalation.
Each brought volatility and predictions of lasting damage. Each time, US and global sharemarkets recovered and moved on.
That resilience isn’t necessarily irrational. Company earnings have been strong, economic growth has held up, and in many cases the damage investors feared simply didn’t happen. The innovation behind much of the market’s strength is real, too. Investment in AI is already lifting profits at the companies supplying the technology and infrastructure, and the productivity gains it promises could be significant over time.
Investors who stayed the course with global shares have been well rewarded, with the AI trade playing a prominent role in recent US gains. In the six months to 6 October, the S&P 500 rose 18.3%, compared with 6.7% for a Goldman Sachs index that excludes companies it classifies as AI enablers.
The fall in technology stocks following the US midterm elections prompted some commentators to ask whether an AI bubble is beginning to burst. It is far too early to know, but the shift is a reminder of how quickly expectations can change.
That kind of shift can expose vulnerabilities that were easier to overlook while markets were consistently rising. A long run of resilience can also quietly change how investors think about risk. When risk leads to losses, investors are reminded it exists. When losses repeatedly don’t arrive, the reminder stops coming and the risk begins to look resolved. Each quick recovery makes the next seem more likely, and familiarity can start to feel like protection.
The pressures are not hypothetical. US inflation was 3.4% in the year to August, with energy prices up 16.3%. The US Federal Reserve responded in September by raising interest rates for the first time since 2023, signalling more may follow.
As for government debt, that matters less for its size than for its cost. US government debt recently passed US$40 trillion, much of which was issued when interest rates were close to zero. As that debt is refinanced at today’s higher yields, the interest bill keeps rising. The US government now spends more on interest than on defence. And because US Treasury yields set the benchmark for borrowing costs around the world, higher yields flow through to mortgages, company borrowing and how investors value shares. The US 10-year yield has risen by nearly a full percentage point since early March.
Meanwhile, enthusiasm for AI has concentrated market leadership. At the end of August, the 10 largest stocks made up 26.6% of the MSCI World Index, and US companies made up 72.1%. That leaves a supposedly global index heavily reliant on one country, a handful of companies, and the payoff from vast AI investment arriving as hoped.
None of these risks is new, and none is necessarily enough to derail markets on its own. But they are connected. An energy shock feeds inflation, which pushes up interest rates and bond yields, and that chain has been playing out this year.
So what could go wrong? The greatest vulnerability may not be any one of these risks, but the confidence that builds as investors watch markets absorb shock after shock. That doesn’t mean markets are wrong. Strong performance can be justified even as rising expectations leave less room for disappointment.
History shows how this can happen. Expectations can rise alongside valuations, while portfolios become increasingly concentrated in whatever has performed best. In the late 1990s, optimism about technology fuelled a speculative boom, followed by three consecutive years of falling US share prices. Before the global financial crisis, a long period of economic growth helped investors grow comfortable with risk, even as borrowing and financial vulnerabilities increased. In 2008, when the credit that had fuelled the boom dried up – and, in one Wall Street banker’s famous phrase, the music stopped – the MSCI World Index fell 40.3% in US dollar terms, including dividends.
Markets rarely turn just because a risk appears. More often, they turn when a well-known risk proves larger, more persistent or more damaging than investors assumed.
For investors, the response isn’t necessarily to own fewer shares. It’s to make sure returns aren’t relying too heavily on any one source. Even a global share index can now leave investors concentrated in a few companies and one country, which makes diversification across sectors and regions matter more than usual.
Would heavy exposure to the largest technology companies still make sense if earnings started to disappoint? Is the mix of shares, sectors and regions still doing its job, or has a strong run in a few areas created more reliance on them than intended? And how much do returns depend on recent conditions continuing?
These are the kinds of questions active investment firms are working through every day. Portfolio managers and analysts research companies, economies and markets, testing their holdings against the changing risks. As conditions and valuations shift, portfolios can be adjusted to reflect the balance of risk and potential return.
Familiar risks aren’t the same as resolved ones. The most important time to remember that is when markets make it easiest to forget.
Disclaimer: Milford is an active manager with views and portfolio positions subject to change. This article is intended to provide general information only. It does not take into account your investment needs or personal circumstances. It is not intended to be viewed as investment or financial advice. Should you require financial advice you should always speak to a Financial Adviser. Past performance is not a guarantee of future performance.
