Global concentration risks to reorient investors: JBWere

A rising concentration risk across global and local equities is reorienting investors to income stocks and fixed income exposure, JBWere said.

JBWere head of asset allocation and portfolio management Glen Bertram noted there is really just the single AI trade which is driving global markets at the moment.

"There were only eight stocks that drove virtually all the gains globally in the first half of 2026 and they are all driven by AI, so there is a huge concentration risk in markets," he said.

Even from a domestic perspective, he said, materials and financials sector make up about 60% of the market.

"As many investors get dragged closer to popular benchmarks, this lack of true diversity will often be unknown," he added.

Bertram said as investors work through the implications of recent tax changes, JBWere expects income-generating assets, including higher-yielding Australian equities, to receive greater attention as part of broader portfolio reviews.

"We are already seeing some private investors pivot away from international equities and towards Australian equities as offshore markets tend to be higher growth markets and we traditionally have greater opportunities locally for income investing," Bertram said.

"The main feature preventing more of this flow, for now, is that offshore equity markets have been performing very strongly."

From an asset allocation perspective, JBWere said fixed income is attractive as real inflation-adjusted returns for the asset class are amongst the strongest they have been in two decades.

"The conflict in the Middle East in the short term, along with underlying sticky inflation pressures, is keeping interest rates relatively high and keeping the pressure on the Reserve Bank. This is a relatively attractive backdrop for, against an environment of ongoing uncertainty," he said.

"We expect more investors will increase their allocation to fixed income given current yields and the defensive nature of the asset class, as well as the broader pivot to income investing driven by recent tax changes."