The shift this week is subtle, but important. Markets are beginning to transition from a world where policy drives outcomes, to a world where physical constraints and geopolitical realities drive outcomes. The distinction matters.

The disruption in the Strait of Hormuz has forced markets to confront how dependent the global economy remains on physical infrastructure - shipping lanes, energy flows, and industrial supply chains. Yet equity indices have remained relatively resilient, suggesting investors still assume the disruption will prove temporary.

Markets spent the week attempting to price a geopolitical shock whose macro consequences remain highly uncertain. The challenge is not predicting how the conflict evolves. It is recognising how shocks like this propagate through portfolios.

Established in 2009, Portfolio Construction Forum Markets Summit is THE investment markets scene setter of the year. It will help you better understand the key drivers of and outlook for the markets, and the opportunities and risks ahead on a three- to five-year view, to aid your search for return and to help them build better quality investor portfolios.

Markets are not panicking. They are re-learning what uncertainty costs. The key signal is not that “something happened". It is that diversification is becoming more conditional. Those constructing portfolios need to be explicit about what they own, why they own it, and what they expect it to do when escalation risk becomes live.

Markets Summit 2026 (Wed 25 Feb) helped delegates understand the key drivers of and outlook for the markets and help you build better quality investor portfolios. AI has kickstarted a fourth industrial revolution that will fundamentally change the way we work and live once more. Simultaneously, US President Trump is weaponising national economic policy and the US-China race for supremacy in AI and control of rare earths is adding further fuel to their titanic geopolitical struggle, reshaping the global geopolitical, economic and trade order. In short, immense societal and economic upheaval is upending the outlook for investment markets. It's a whole new world (again)!

2025 was likely the beginning of the end of US exceptionalism in markets. It's a whole new world (again)! – but many portfolios are positioned for the past based on an incomplete assessment of risk and reward.

For decades, investors relied on a stable, predictable world. Today, that world is being mugged by reality. Portfolios must focus on places where the rule of law still matters and identify the strategic bottlenecks that now pick the winners and losers.

This session explored two perspectives on the drivers of and outlook for Australian and global fixed income - The RBA's lower speed limit means lower interest rates, not higher; and, Unconscious and concentrated, it's no time to be passive.

The dominance of passive investing and mega-cap concentration has created a widening structural opportunity in small-cap equities. As index flows channel capital toward ever-fewer large companies, the 5,000 smaller companies that represent 90% of developed-market listed securities receive less institutional attention, less analyst coverage, and less capital - deepening mispricing’s that have historically driven long-term outperformance. These dynamics are accelerating - sell-side economics continue to deteriorate, coverage gaps are widening, and the proportion of small caps with no analyst coverage now exceeds 30%. The result is the widest inefficiency in public equity markets and a compelling return outlook for investors with the patience and depth of knowledge to exploit it. Small-cap alpha is structural, not cyclical, and the conditions that generate it are strengthening.

The value factor has underperformed for a decade and frustrated allocators have increasingly abandoned the style, with global equity portfolios heavily tilted towards factors and regions trading at historical extremes. Value is too often perceived as low quality, cyclical, economically sensitive and littered with disrupted former titans. But allocators willing to take a more contemporary approach to identifying value can build in diversifying ballast within global equity portfolios, particularly against a backdrop of increasingly concentrated passive exposure. Markets are entering a whole new world (again!), a turning point where the next cycle’s winners will look very different from the past decades. AI is hardly the only activity reshaping the world – geopolitical realignment, energy transition, and aging demographics are creating profound mispricing, offering asymmetric opportunities and, in turn, diversification and downside protection against passive core portfolios overweight the ‘old world’.

While investors chase the latest market darlings, Global REITs - an asset class with a proven long-term track record of competitive returns and reliable income - have become arguably the new world’s most overlooked asset class. The valuation disconnect between REITs and broader equities is at levels only seen during the GFC, yet the underlying real estate fundamentals tell a very different story. A global undersupply of housing is driving persistent rent growth, an ageing population is fuelling demand for healthcare and senior living properties, and new construction across key sectors is falling, setting up well-capitalised landlords to benefit from tightening supply. For investors willing to look past short-term sentiment, this whole new world of disruption has created arguably the world’s most overlooked asset class - it’s time to ‘buy-the-dip’ in high quality global real estate.

A changing equity market structure is emerging, driven by changing investor behaviour and advances in AI. As markets become broader, more inefficient, and increasingly complex, this environment requires a complete rethink of how markets function and how alpha is generated. Global small-cap equities sit at the centre of this shift. They represent one of the last frontiers of inefficiency in public markets, where dispersion, limited analyst coverage and wide breadth continue to create pricing inefficiencies. With valuations in many regions still below large-cap peers and earnings growth broadening, the asset class presents a compelling long-term opportunity over the next three to five years.

Powerful cyclical, secular and structural changes are reshaping the outlook for asset classes and opportunities abound for those able to reorientate investment portfolios accordingly. This session explores a mix of perspectives on the outlook for real assets, global absolute return debt, and Australian and international private credit.

Headlines everywhere highlight the growing demand for power generation, largely driven by digitalisation, artificial intelligence, robotics, and automation. A topic less spoken about is the undersupply of infrastructure needed to support it – and how this could provide a real market opportunity for investors. To meet this demand, trillions of dollars would be necessary over the next five years, creating what could be a generational investment opportunity in core infrastructure assets, offering attractive current yield, the opportunity for diversification, and potential relative downside protection.

The first order impact of post-GFC bank retrenchment trimmed corporate credit risk from their balance sheets and bore the Direct Lending boom. We are now in the early innings of ABF filling a similar void of capital. ABF touts an +11tn TAM with less than $500bn of dedicated fund manager AUM currently addressing the opportunity set across a wide variety of Hard Assets and Financial Assets.

Powerful cyclical, secular and structural changes are reshaping the outlook for asset classes and opportunities abound for those able to reorientate investment portfolios accordingly. This session explores a diverse mix of perspectives on the outlook for on the outlook for global equities and liquid alternatives.

We are living in an age of exponential change and radical uncertainty. We must prepare ourselves (and our portfolios) for the seismic societal and economic shocks that are hurtling our way – we're witnessing the mother of all disruptions.

Jonathan Pain, Author and Publisher of The Pain Report, is a regular key note presenter at Portfolio Construction Forum's continuing education programs. Over the years, he has debuted new investment theses and challenged delegates about how to build better quality investor portfolios...

AI has kickstarted a fourth industrial revolution that will fundamentally change the way we work and live once more. Simultaneously, US President Trump is weaponising national economic policy and the US-China race for supremacy in AI and control of rare earths is adding further fuel to their titanic geopolitical struggle, reshaping the global geopolitical, economic and trade order. In short, immense societal and economic upheaval is upending the outlook for investment markets. It's a whole new world (again)! Markets Summit 2026 (Wed 25 Feb) will help you better understand the key drivers of and outlook for the markets and help you build better quality investor portfolios.

Markets are not capitulating. They are re-calibrating. Yet beneath that surface stability, assumptions are being quietly rewritten. We are operating in a whole new world (again)!. Not because growth has collapsed. But because capital is being redeployed under a different set of structural constraints.

Markets are not breaking. They are repricing assumptions. What stands out most right now is not recession panic, nor speculative euphoria - but transition. The more useful question is not “Are we heading into a downturn?” It is: “What regime are we moving toward - and which portfolio assumptions quietly depend on the old one?”

What defines the current environment is not fear, but discrimination. Markets are no longer rewarding participation by default. That shift from belief to verification may be the most important signal of all.

Investors will look back on 2025 as the beginning of the end of US exceptionalism. Practitioners must now consider geopolitics in their fundamental analysis, alongside macroeconomic and company factors.