Prepare, don’t predict: Portfolio Thinking publishes investment outlook built for advisers’ decisions, not forecasts

Portfolio Thinking, the investment research firm for financial advisers, today announces its first Annual Outlook, Prepare, Don’t Predict. Rather than attempt to predict the near term movements of markets, it is designed to help advisers prepare their clients for whatever lies ahead by addressing the key questions facing investors as we enter 2027.

The limits of traditional forecasts were clear in 2026. Investors entered the year expecting interest rates to fall. Instead, the attack on Iran closed the Strait of Hormuz, oil prices rose sharply and central banks raised rates, while shares in the largest US companies still reached a series of record highs. Many forecasts were revised after prices had moved rather than before. A portfolio built on these forecasts would have struggled to deliver for investors.

The Portfolio Thinking Outlook is designed to be used rather than simply read. Each article aims to help investors make good decisions in the face of today’s challenging investing conditions. Every article is written for advisers to use in conversations with clients, and can be issued by advice firms under their own name and in their own style using Portfolio Thinking’s Edge and Voice tools.

Six key decisions for 2027, and how to make them well

Alongside its introduction, the Outlook is published as six articles, each of which addresses a key challenge for investors:

1. How to use estimates of future returns. It is tempting to treat expected returns as forecasts and to act on small differences between them. The Outlook shows the range behind each estimate, suggests acting only where ranges are clearly apart, and revisiting portfolios when the signposts change rather than when the headlines do. As gilt yields have risen, it also asks advisers to check that clients are being paid for the risks they take. (Signposts, Not Satnav)
2. How much a portfolio should depend on artificial intelligence. On Portfolio Thinking’s estimates, thirteen AI linked companies contributed about 60% of the return from US large companies between November 2022 and August 2026, so owning the index has become a large bet on one theme. Rather than argue over revolution or bubble, the Outlook asks investors to accept that any of four futures could arrive, check how the portfolio would fare in each, and diversify so that it depends on none of them. (Artificially Inflated?)
3. What job government bonds should do. After the losses of 2022, many investors are tempted to move to cash just as gilts pay more than they have for almost twenty years. The Outlook suggests writing down the job the bonds in a portfolio are there to do, and rebalancing to an agreed weight at each regular review rather than on last year’s return. (Have Bonds Met Their Dr No?)
4. Whether to hold more than the index in smaller companies. Smaller companies have lagged for a decade, and it is easy to read “cheap for years” as “cheap for good”. The Outlook suggests setting the allocation on today’s prices rather than the last decade’s returns, and sizing it so that clients can hold it through years of lagging. (The Best Things Come in Small Packages)
5. On what terms to own private assets. Assets in US semiliquid funds approached $600 billion in March, more than double their level at the end of 2022. Rather than judge them by smooth past returns, the Outlook suggests setting a hurdle: what the strategy must earn above a listed alternative to justify its costs and the years the money is tied up. It also suggests planning as though withdrawals may be limited when they are most wanted. (Mind the Gap)
6. How to prepare clients for the next shock. £100 invested in developed market shares in May 2016 grew to about £372 by the end of October 2026, against about £213 for an investor who sold after each fall of 10% or more and waited for a new high to reinvest. The Outlook suggests judging a portfolio by how it would cope with a range of roads, stress testing it against many scenarios, and agreeing with clients in advance what will happen when markets fall. (Built for Rougher Roads)

Dan Kemp, co-founder of Portfolio Thinking, said:

“An outlook is only as useful as the decisions it supports. Instead of asking what 2027 will bring, we have focused on how we can help advisers move their clients closer to their goals. Each year it is tempting to read an outlook as a prediction and act on it. However, its better use is as a test: is each portfolio prepared for more than one outcome, and is it built from assets priced to reward investors for the risks they take? That conversation, held before the surprise rather than after it, is where advisers add most value.”

“We will face booms, panics and surprises in 2027 that no outlook anticipated. Owning high quality assets at sensible prices, in portfolios prepared for more than one outcome, will continue to serve patient investors long after the headlines are forgotten.”