So far in 2026, markets have been shaped by an unusually broad range of cross‑currents – from artificial intelligence (AI) innovation driving disruption, and new artificial intelligence (AI) winners and losers, to heightened geopolitical uncertainty, conflict in the Middle East, and rapidly evolving interest‑rate and inflation expectations. It’s rare to see so many forces at play in markets at the same time.
Against this backdrop, the Federated Hermes Sustainable Global Equity Strategy remains firmly focused on the long term. Our high‑conviction, bottom‑up approach targets both transformative change and financial outperformance, allowing us to really look through near‑term noise, build a diversified portfolio and use periods of heightened volatility to actually uncover new opportunities.
Overlooked emerging markets
An area we have been excited about for some time is emerging markets (EM), where exposure to attractive end-markets, favourable demographics and rising incomes continues to drive long-term growth. Despite these structural tailwinds that we’re seeing, valuations in EM remain compelling relative to developed markets, creating an attractive risk-reward opportunity.
Within the portfolio, we have exposure to several emerging market banks across Peru, Mexico and India. These institutions benefit from supportive demographics, increasing financial penetration and rising participation in formal banking systems, alongside structurally high net interest margins and robust balance sheets, and this positions them well for sustainable long-term growth.
The Federated Hermes Sustainable Global Equity Strategy remains firmly focused on the long term.
Capital-intensive names
Capital‑intensive businesses continue to offer attractive risk‑reward. These businesses benefit from tangible assets that are harder to displace, high barriers to entry and embedded customer relationships. Expectations for many of these businesses remain muted, yet fundamentals are improving as industry activity stabilises. In an environment where the long‑term AI disruption risk to asset‑light business models is still uncertain, exposure to asset‑heavy companies can also provide useful diversification and resilience.
One example company we like is Linde, a leading industrial gases group operating in an oligopolistic market. Linde benefits from clear structural growth tailwinds driven by electronics demand and decarbonisation, where the company has particular exposure to blue and green hydrogen.
Commodity-sensitive stocks
Commodity‑sensitive stocks are benefiting from a supportive backdrop of higher commodity prices driven by geopolitical conflict, supply constraints and longer‑term structural shifts in demand. Disruptions to global supply chains have really highlighted the importance of physical capacity and reliable producers, while energy transition trends continue to underpin demand for key industrial materials. As a result, parts of the market are seeing improved pricing dynamics and stronger cash‑flow generation.
A company we like in this space is Norsk Hydro. We’ve seen escalating conflict in energy-intensive regions which has disrupted aluminium production, reducing global supply and pushing prices higher. As a leading aluminium producer, Norsk Hydro is well positioned to benefit from both their vertically integrated business model and improving pricing dynamics going forward.
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This information does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments.
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