At the beginning of every year, we take stock of the economic and market conditions that may influence investment decisions in the months ahead.
Genus’ Executive Chairperson and Chief Investment Officer, Wayne Wachell, and Chief Sustainability Officer, Stephanie Tsui, will sit down – both in person and online – to discuss their 2026 investment outlook: a look at the trends, risks and opportunities shaping 2026. (You can register to join them here).
Here’s a sneak peek at some of the topics they’ll cover.
AI’s evolving impact
Unsurprisingly, AI will remain a dominant investment theme in 2026. But according to Wachell, the market is entering a more selective phase. “AI is going to be a leader next year, but I think selectivity in that space is going to be important,” he says. “We’re starting to see a bit of a splitting of the competition – rather than capital flowing uniformly to certain players.”
Wachell does not view this shift as a sign of an imminent bubble. Instead, he likens it to earlier periods of transformative infrastructure buildout. “It’s similar to building the railways in the 1880s. There were booms and busts, but in the longer term, it had legs.”
The broad, infrastructure-led gains that defined the early stages of the AI cycle are likely behind us. Going forward, returns will increasingly depend on identifying where value and sustainable business models are emerging.
Growing global energy demands
AI-driven energy demand is rapidly reshaping global priorities, pushing energy security and capacity to the forefront of economic planning. In the near term, this surge is increasing reliance on all forms of energy as countries race to meet unprecedented demand. “AI is driving a lot of energy demand, and this will push all forms of energy, including more traditional forms, to be used more,” Tsui says.
This reality is helping to fuel the transition to renewable energy, but the energy needs are so great, it’s also pushing net-zero goals forward from 2030 to 2050.
Over the longer term, however, AI may become part of the solution to a more sustainable energy system. “AI could bring better forecasting, better optimization and help decentralized energy sources become better integrated into the broader system,” Tsui says. This would help to improve grid reliability, maintenance and efficiency.
From an investment perspective, energy dynamics may increasingly act as both a constraint and a potential source of opportunity as AI adoption accelerates.
Regulation as a competitive lever
Governments are betting that AI-powered growth, productivity gains and targeted deregulation will help manage rising debt levels while supporting this energy-intensive expansion. Fiscal spending and policy shifts are increasingly being aimed at strengthening national competitiveness and energy resilience, even if that involves difficult trade-offs in the short term.
Shifting ESG regulatory landscapes will remain an important factor in 2026, as governments reassess how sustainability policy affects competitiveness and capital formation. Responding to growing pushback on disclosure requirements and reporting complexity, some policymakers appear to be moving toward a more pragmatic approach, and Tsui says “it will be interesting to see how everything plays out with regulatory landscapes changing.”
In Canada, the focus is not only on addressing greenwashing, but increasingly on improving global competitiveness – ensuring regulation supports growth, investment and innovation rather than holding it back. How effectively policymakers strike that balance will shape opportunities for businesses and investors alike in the year ahead.
Where markets may lead in 2026
Looking ahead to 2026, based on internal analysis, current indicators continue to suggest a generally constructive market environment, though outcomes remain uncertain. “Our models are still positive,” Wachell says, “and market behavior is increasingly aligning with those signals.”
He notes that current indicators are showing increased sensitivity to “cyclical areas such as financials, industrials and resource-related sectors,” reflecting a market environment that may reward exposure to areas more closely tied to economic activity and infrastructure spending.
Central bank policy remains a supportive backdrop, with interest rates easing across many regions. “This pattern usually leads to a response in the economy,” Wachell says – one that historically has been constructive for markets.
That support, however, is not without risk. Stronger-than-expected growth could reintroduce volatility. Markets tend to struggle “when the economy is hot and the Fed has to raise rates,” Wachell cautions.
The key risk for investors is not a lack of growth, but the possibility that growth accelerates enough to bring inflation and tighter policy back into focus. “If we can get growth with low inflation, we’ll be in a good position,” he adds, while cautioning that “midterm years aren’t typically great years for equity markets.”
For now, the outlook remains positive – but increasingly dependent on balance, diversification and attention to shifting market leadership.
Looking for a more exhaustive forecast for 2026? Register to join our annual year in review and 2025 market outlook or watch the recording.
This document is provided for general information purposes only and is not a substitute for professional advice. It does not constitute investment, legal, accounting, tax, or other advice or recommendations, nor should it be relied upon as the basis for any decision. Readers should seek specific professional guidance before making financial” or investment decisions. Certain information herein is based on third-party sources believed to be reliable, but its accuracy and completeness are not guaranteed. Past performance is not a guarantee of future results.
