Global economic uncertainty, rising inflationary pressures and escalating geopolitical tensions are expected to shape investment strategies in the second half of 2026, prompting investors to focus more heavily on portfolio diversification while avoiding excessive exposure to long-term bonds, according to Krungthai Asset Management (KTAM).
Chavinda Hanratanakool, KTAM chief executive, said diversification remains the most important investment strategy in today's rapidly changing and highly unpredictable environment.
"Diversification is key," Ms Chavinda said, emphasising that investors should spread their portfolios across regions, investment themes and asset classes to create balance and provide a buffer against market volatility.
KTAM continues to favour equities over fixed income in asset allocation strategies, while advising investors to be cautious about long-duration bonds due to ongoing uncertainty surrounding wars, interest rate trends and inflation.
BONDS LOSE APPEAL
According to Ms Chavinda, persistent inflation remains one of the biggest challenges for investors globally. Returns from government bonds and short-term fixed-income instruments may no longer be sufficient to outpace rising living costs or generate meaningful long-term wealth.
Consequently, KTAM recommends reducing exposure to long-term bonds and increasing allocations to equities and alternative assets, including commodities, to improve portfolio resilience.
She warned that geopolitical conflicts could continue to trigger sharp swings in commodity prices, particularly oil, creating additional uncertainty for bond markets.
"In an environment where inflation is inevitable, investors need assets that can grow faster than rising expenses," she said.
THEMES FOR GROWTH
KTAM identified several investment themes with strong long-term growth potential, including artificial intelligence and technology, healthcare, cybersecurity, and food- and agriculture-related sectors.
Ms Chavinda said food, agriculture and nutrition stocks could particularly benefit during periods of war and geopolitical instability, as concerns over food shortages tend to drive demand and prices higher.
At the same time, companies with strong pricing power and operational flexibility are expected to outperform during inflationary periods, while businesses subject to price controls could struggle to pass rising costs on to consumers.
Technology-related sectors, especially AI and cybersecurity, were also highlighted as high-growth opportunities capable of significantly lifting overall portfolio returns despite volatile market conditions.
Meanwhile, commodities remain an important hedge against inflation and geopolitical shocks. Ms Chavinda noted that commodity prices can surge far beyond expectations during crises, reinforcing the need for investors to maintain exposure to alternative assets.
DIVERSIFICATION STRATEGY
Ms Chavinda also cautioned against overly concentrated investment strategies, citing past investor overexposure to China as a key lesson in risk management.
She said many investors previously viewed China as a long-term growth engine before the Covid-19 crisis and other unforeseen developments caused severe disruptions and substantial portfolio losses.
"The world can change unexpectedly at any time," she said. "That is why investors should never concentrate too heavily in a single market or asset."
Instead, she recommended maintaining diversified exposure across regions and sectors, while selectively increasing holdings in undervalued assets that still offer attractive long-term upside potential.
Despite favouring equities, KTAM still recommends maintaining balanced exposure to short-term fixed income and alternative investments to preserve portfolio stability amid ongoing global uncertainty.
