Project 2026- My Thesis
IMPORTANT NOTE: This thesis represents the findings of my own research and interpretation of the present economic situation, and in no way constitutes financial advice. I strongly recommend every reader conduct their own due dilligence, or seek out professional financial advice before investing.
This is my new updated plan for 2026. I plan to hold this portfolio for a minimum of 1 year. Below is my investment thesis:
My primary assumption for this portfolio is that the market has entered an AI driven valuation bubble, which I expect to burst in 2026. The reason for this is that I expect adoption among small-medium enterprises to slow, and CapEx growth among large enterprises to slow year on year. I therefore expect valuations to be trimmed as slower growth is priced in.
Based on this, I have chosen to invest most (around 70%) of my investing budget into an ETF that is long JPY at the expense of GBP. Firstly, if a stock market crash happens, I expect investors to flock to safe haven assets such as the Swiss Franc and Japanese Yen, as these currencies tend to strengthen during economic downturn. In particular, I believe the Yen is already massively undervalued in relation to other major currencies, and I expect the JPY to appreciate against the GBP as the Bank of England continues cutting rates next year (I personally anticipate two to four rate cuts in 2026), and as the Bank of Japan raises rates (I anticipate two to three rate increases between now and the end of 2026). Further, while the Takaichi government have so far appeared unconcerned about the Yen’s weakness, I expect it to only be a matter of time before the government realises that a major factor driving increased tourism in Japan (something Mrs Takaichi made a big deal of as she ascended to the premiership) is the Yen’s weakness, which incentivises tourists to flock to Japan and take advantage of cheaper prices. If Takaichi is serious about reducing tourist numbers, I expect them to become more supportive of policies that strengthen the Yen, or at least prevent further depreciation. These factors, combined with the aforementioned threat of a stock market crash, have led to my expectation of a strong appreciation of the Japanese Yen against the risk-on Pound Sterling. Plus, I’m planning on moving to Japan next year, and want to preserve my purchasing power.
Additionally, I have purchased shares of Danish pharmaceutical giant Novo Nordisk, which accounts for 20% of my portfolio. The company has fallen on tough times after its valuation bubble burst in 2024, but the underlying fundamentals of the company are excellent, and the stock traded at a trailing P/E of only 11-12 at the time of stock purchases. This valuation, for a company with excellent cash flow, consistent profitability and a huge untapped market of obese and diabetic patients, is a real rarity, especially in this market. Furthermore, the company has a history of being, in my view, detached from wider trends during bear markets. During the Dot Com bubble burst (March 2000 to October 2002), the stock price finished at roughly the same price as to where it started, during a time when the S&P500 fell by almost half. In fact, between March 2000 and October 2000, it gained by over 50%. During the Housing Bubble crash between October 2007 and March 2009, when the S&P500 declined by more than half, Novo only declined by around 20%, and between October 2007 and May 2008, it even went up. With a value proposition as strong as the company offers, and strong defensive characteristics, I decided to take advantage and add Novo to my portfolio, split between holdings in US dollars and euros to diversify across currencies.
Additionally, the pie has two minor positions in B&M European Value Retail and Mondelez International. These are both more speculative, and so are much smaller than the Novo and Yen plays. In the case of Mondelez, it has recently been battling headwinds with heightened cocoa prices, and I am betting that as cocoa prices come down, the company will benefit. However, the company (being part of the S&P) may be indirectly sold during a market crash as people sell their ETFs in a panic. Plus, the stock is relatively pricey at a P/E of around 21. That said, I think there is potential upside if cocoa prices normalise and the crash I expect happens later in 2026 (or somehow doesn’t materialise at all). As for B&M, the company has done infamously badly the last year, crashing over 70% and now trading at a p/e ratio of only 5ish. While the company’s execution has been, honestly, piss-poor, it is still profitable and fundamentally sound long-term, and may benefit from shoppers switching to budget stores in an economic downturn. It’s high risk, but if the new CEO and recently shaken up board can successfully execute their turnaround plan, regain market share and improve their margins, the potential rewards are in my view substantial.
Please find my pie here! Would appreciate any feedback!: https://www.trading212.com/pies/ltzwdvzWXgVypyqmqQ7vSCatTkk98