As we step into a new year, with ongoing media rumbles of an ‘AI bubble’, it feels like a good moment to pause.
Not to make futile predictions about what markets might do next, as we explained in a blog last week (here), and certainly not to react to whatever narrative happens to be loudest right now on your newsfeed. But to take a breath, look back at where we have come from, and remind ourselves what really matters as long-term investors.
Periods like this can be when questions feel louder. Strong returns have a habit of quietly changing how people feel about risk, often without necessarily realising it. So before we look ahead, it is worth acknowledging what the last few years have delivered.
Looking backwards: appreciating what 2025 represented
From a market perspective, 2025 marked a third consecutive year of strong returns for global equity investors. That is not something to brush past lightly. Markets do not move in straight lines, and periods of above-average performance are never guaranteed.
For boosst clients invested only in global equities with boosst 100, a disciplined and diversified approach delivered 14.15% in 2025. boosst investors who use boosst 60 or boosst 80, which include allocations to short duration bond funds to reduce price volatility, also saw healthy returns of 11.07% and 12.71% respectively.
Those results were not driven by bold calls or clever positioning. They came from our investment committee doing the unglamorous work properly and making long-term decisions to stay diversified and accept uncertainty, allowing time and compounding to do what they tend to do when left alone.
It is also worth remembering that even strong years contain moments that feel uncomfortable at the time. Early in 2025, markets fell sharply as concerns around trade policy and US tariffs took hold. That period may have tested your resolve, not because it was unprecedented, but because it was unexpected. A year earlier, very few people were worrying about tariffs at all.
Markets recovered, as they so often do, and those who stayed invested benefited. It was a useful reminder that the things which cause markets to wobble are rarely the risks that dominate headlines in advance. We now enter 2026 with that same mindset.
Why the future feels more uncertain right now
After three good years, it is natural for questions to surface, for example:
- Are markets expensive?
- Have we become too reliant on a small number of companies?
- Is something building beneath the surface that we should be worried about?
At the moment, many of those questions are being channelled into a single dominant narrative in the media: artificial intelligence, and the idea that we may be living through an “AI bubble”. The suggestion being that the share prices of AI companies are over-priced and they will not deliver as much as people expect, which could see those companies suffer a share price fall.
That concern is understandable. When a genuinely new technology arrives, it tends to concentrate attention, capital and emotion in equal measure. One of the most useful ways to make sense of moments like this is to look backwards to look forwards. Railways, the internet and now AI all share more in common than first appears.
AI, bubbles and how progress usually unfolds
History suggests that transformative technologies tend to arrive in a familiar way.
In the nineteenth century, it was railways. Enormous sums of money were poured into building track across countries. Much of it was inefficient. Some of it was redundant. Many companies failed and investors lost money. Yet the rail networks that emerged went on to reshape economies for generations, enabling entirely new industries and ways of living, which those same investors later benefitted from.
The same pattern played out during the rise of the internet. The dot-com boom ended painfully in 2000, and with hindsight many of the valuations of that era appear absurd. A large number of companies disappeared. But the infrastructure built during that period did not vanish with them. It became the foundation upon which thousands of successful businesses were later built, solving real human problems and creating lasting value, that once again, the same investors who suffered in 2000 could later benefit from as markets went on to reach new highs.
The case could be made that artificial intelligence may be following a similar path. Vast sums are being invested in data centres, computing power and energy infrastructure. It is likely that many of the companies at the centre of today’s excitement will not survive in their current form. Others will go on to dominate their industries. And many of the eventual beneficiaries of this investment have not yet been founded.
This is a point that is often missed when the conversation focuses solely on bubbles. Periods of excess and misallocation are often part of how new technologies become embedded into the economy. The waste and the progress tend to arrive together.
Thankfully, we do not need to predict the winners
At boosst, we do not try to guess which individual companies will emerge as long-term winners from technological change. We do not need to. By taking an evidence-based approach built on broad diversification, we own exposure to the entire system. That includes today’s market leaders, the companies building the infrastructure, and the future businesses that will create products and services on top of it.
In simple terms, we own the whole haystack rather than trying to identify the needle in advance.
History suggests this matters. The greatest value created by new technologies has rarely accrued neatly to the companies that attract the most attention at the outset. Owning the market allows investors to participate in progress without needing to know where, or when, that progress will ultimately show up. The smaller listed companies today who will go on to become the biggest winners of the future are already within our haystack and boosst clients are already invested in them.
A calmer view on concentration
Concerns about AI are often closely linked to worries about market concentration, particularly in US equities. Intuitively, it feels risky when a small number of companies make up a large proportion of an index. 7 companies currently make up around 32% of the S&P500.
However, history suggests that concentration on its own has been a relatively weak predictor of poor long-term outcomes. Large companies are often collections of businesses rather than single ideas. Apple’s AirPods division alone is thought to generate around $20 billion in annual revenue. If spun off tomorrow, it could be larger than Spotify, Nintendo, eBay, and Airbnb. Similarly, its Mac division, iPad division, and Wearables division would each rank among the world’s largest technology companies if listed separately.
The same applies across the top 10. YouTube, buried inside Alphabet, generates $54 billion in revenue and would likely make it one of the 20 largest companies in the world. Amazon’s AWS cloud division crossed $100 billion in revenue last year. Microsoft contains Azure, LinkedIn, Xbox, and Office 365, each generating billions independently.
The “top 10 concentration” is partly an illusion of corporate structure. If these companies reorganised into their component parts, the index would look far more diversified overnight, without any change in the underlying businesses you actually own.
Markets have been concentrated before, sometimes to an even greater degree than today, without that concentration proving fatal to long-term returns. What has tended to matter more is valuation and behaviour, not the presence of a handful of dominant firms.
Valuations can influence long-term expected returns, but they tell us very little about timing. Acting on valuation concerns by stepping in and out of markets brings a host of other risks far greater than market volatility.
Preparation rather than prediction
After strong periods, there can be a temptation to do something. To become more defensive. To step aside, just in case.
The difficulty is that portfolios designed to achieve your long-term financial plan already assume that markets will sometimes fall. Making changes based on discomfort in the moment is not helpful, and more often, it is speculation dressed up as caution.
Good preparation often looks like very little is happening. In reality, it reflects decisions made calmly in advance, when emotions were lower and objectives were clearer.
Ensuring there is sufficient cash available for known short-term spending matters. Beyond that, long-term investments are usually best left to remain long-term.
A final thought as we start 2026
We do not know what 2026 will bring. Markets may continue to rise, they may fall back, or they may move sideways for a while. The next bout of volatility will almost certainly be triggered by something that is not dominating headlines today.
What we do know is that diversification, discipline and patience have served investors well across many different environments. The role of your portfolio is not to predict the future. It is to support the life you want to live, through all the uncertainty that inevitably comes with it.
If you would like to talk any of this through, or simply want reassurance as we start the year, we are here.