2026 predicted to be a year of market volatility

Market volatility is expected to increase in 2026. That's according to a survey of Financial Advisers carried out by Wesleyan.

An overwhelming 92% of those who responded to the survey thought that the markets were in for some upheaval this year. This was due to a number of factors. Foremost among these was uncertainty over the global economy, with 68% citing this as being the key driver to market volatility.

But the advisers who took part in the research weren't just placing the blame for instability at the global economy's door. Closer to home, the state of UK inflation and the Bank of England's interest rate decisions were also popular reasons for the rather gloomy prediction, at 61% and 50% respectively. Global conflict (42%) and a fall in tech company equities (39%) also featured on the list.

Elsewhere, 82% of the Financial Advisers polled believed that the government's push to build a stronger culture of retail investing in the UK would make concerns about market volatility a bigger issue for clients. These concerns could put clients off investing in growth assets, with 45% expecting around a third of their clients to think twice before putting their money into equities and the like.

And it's not only investing that could be affected by the threat of market volatility. Those about to leave the world of work could take a hit too, with 45% of advisers expecting most of their clients nearing or at retirement age to postpone, or at the very least change their retirement plans.

A smoother alternative for 2026

To help clients prepare themselves for any market volatility, Financial Advisers intend to keep them in the loop regarding the financial outlook for the year. Plans to discuss the drivers of volatility and what it means for their money and goals, featured highly on the list of strategies to help clients manage any adverse effects of market instability.

Other approaches included increasing investment into 'smoothed' funds, which adjust for market volatility by holding back some returns when the markets are high to cover losses when they're low. This was stated by almost half of the survey respondents (48%) as being one of the key options to counter the predicted upheaval.

James Tothill, Investment Specialist at Wesleyan Assurance Society, explained the logic behind shifting investment into smoothed funds: "We're seeing growing adviser interest in smoothed funds as a way to help specific client segments manage volatility without sacrificing long-term growth potential.

"Smoothing offers a way to stay invested in growth assets while avoiding the emotional and financial impact of short-term market swings. Whether that's helping clients maintain discipline during uncertain periods or protecting those who can't afford to see significant portfolio fluctuations at critical points in their financial journey."

Whatever 2026 brings, Financial Advisers are looking to keep ahead of the curve and help mitigate any impact on their clients.

The value of investments and any income can go down as well as up. Investors may get back less than they invest.