How to prepare your portfolio for shocks and growth opportunities in 2026, according to UBS
HS 22/12/2025
The stock market this year is heading for double-digit gains as 2025 winds down, but investors should take an active role if they want to prepare for success in the new year. The S & P 500 is higher by about 17% year to date, powered by surges in communications services and information technology stocks. Excitement over the artificial intelligence trade has more than tripled the price of companies such as Micron Technology and Palantir Technologies in 2025. .SPX YTD mountain S & P 500 in 2025 Investors should celebrate this year’s winnings, but should also gear up for 2026, according to UBS’s Chief Investment Office, Global Wealth Management team. “We believe the end of the year is an opportune time to prepare portfolios for the ups, downs, and opportunities markets will offer in the year to come,” the bank said in a note last week. UBS sees “resilient macroeconomic growth, robust earnings and continued (and increasingly profit-generating) AI investment” powering stocks higher in the new year. Here are a few steps the bank says can position investors for success in 2026. Review your financial plan Before you tinker with your asset allocation going into the new year, revisit your financial plan and make sure your portfolio moves align with your long-term goals. For instance, it may seem tempting to just let your tech winnings ride into the new year, but 2025’s sharp appreciation in that sector means that your portfolio may now be too heavily tilted toward tech plays. The result: Your holdings may not reflect your goals and risk appetite. Rebalancing your portfolio by selling off some of your winners and reallocating the cash to less-loved sectors could help you avoid having lopsided positions. That may also help soften the blow when the market sells off. “Regular reviews and asking for help when needed can find and plug gaps, so the plan withstands the ups and downs of markets,” UBS wrote. Get cash off the sidelines While the Federal Reserve has embarked on a rate-cutting campaign, yields on cash are still relatively attractive. The Crane 100 Money Fund Index , which reflects the largest money market funds, has an annualized seven-day current yield of 3.58%. Select high-yield bank accounts are also still offering attractive rates. Bread Financial’s high-yield savings account touts an annual percentage yield of 4.05% as of Monday. Cash is key for investors who want to keep some liquidity and avoid having to sell in a down market, but allocations should be too large, UBS’s CIO team wrote. For starters, yields on cash won’t outpace inflation. “Funds for everyday spending should remain readily available and exposed to minimal risk,” UBS said. “Invest longer-dated liquidity in assets with some interest rate, credit or market sensitivity in search of higher yields above inflation.” Aim for a resilient portfolio Take some of that extra cash and put it toward diversifying your holdings, including using balanced portfolios, UBS said. The firm said that a strong portfolio core includes an allocation toward equities and fixed income. Dating back to 1945, phasing into a diversified portfolio of stocks and bonds has beaten cash for roughly 75% of one-year horizons and roughly 84% of five-year horizons, according to UBS. Portfolio hedging can also help investors diversify away some of their risk. Earmarking a mid-single-digit percentage to gold may help cushion investors from geopolitical shocks, UBS said. Further, high-quality government bonds tend to rally more than cash in a downturn. Watch out for opportunities An investor with some cash on hand may also be better poised to snap up solid deals on stocks, as well as opportunities to diversify across sectors and the globe. In the U.S., UBS likes companies in the tech, utilities, financial and health care sectors. In Europe, the firm’s CIO team prefers banks, utilities, industrials and technology.
