One of the most important shifts in markets right now isn’t about whether investors are “risk on” or “risk off”.
It’s that capital is becoming more selective.
In early 2026, money is still finding its way into markets - but not in the broad, forgiving way we saw through much of the 2010s. The old environment rewarded simple positioning: hold the index, trust diversification and assume correlations would behave. Today, that mindset is being tested.
The flow signals are telling us something different: investors want exposure, but only if it’s resilient. They want returns, but not fragility. They want diversification, but not theoretical correlations. And they want portfolios that can adapt as conditions change, rather than relying on static assumptions.
For advisers, this matters because it aligns perfectly with what clients are experiencing. Clients haven’t stopped wanting growth. But they are far less willing to tolerate drawdowns with money that has a job to do - particularly retirees, pre-retirees and anyone drawing income. In that world, portfolio structure becomes a major determinant of whether a client stays the course or makes the wrong decision at the wrong time.
Selectivity Is a Sign of a New Regime
You can see this shift in several places.
First, concentration risk is being questioned. Global equities - particularly the US - remain a centre of gravity, but investors are increasingly uncomfortable relying on a narrow group of mega-cap names to drive outcomes. There is more attention on breadth, valuation and earnings quality.
Second, fixed income is back in portfolios - but not because investors believe we’re returning to the old 60/40 playbook. The demand is more functional: income, ballast and liquidity.
Investors are looking for fixed income to do a job again, not simply to exist as a static diversifier. Selectivity matters here too.
Third, the “hard asset” story has evolved. Gold and silver has become more uneven, but the broader message hasn’t disappeared. Capital continues to seek exposure to scarcity and real-economy pricing power - resources, energy security, infrastructure and resilient cash flows - rather than treating precious metals as a single catch-all hedge.
And in private markets, selectivity is even clearer. Private equity has become more discerning, with greater focus on secondaries and co-investments, while private credit remains strongly supported as investors prioritise income, structure and seniority. The point isn’t that private markets are “good” or “bad” - it’s that capital is increasingly allocating with purpose.
This is what selectivity looks like. It’s not panic. It’s discipline.
Why This Environment Favours Active Management
This is the type of market where active management becomes more relevant.
Passive investing works best when markets are broad, correlations are stable and leadership is persistent. But when dispersion rises - when winners and losers separate, valuations matter again, and macro shocks create uneven outcomes - active decision-making can add real value.
That doesn’t mean every active manager will outperform. But it does mean that the opportunity set for genuine alpha islarger than it has been in years.
In a selective market, the question is no longer “how much equity exposure do I have?” It becomes:
Those are portfolio construction questions - not market prediction questions.
Why This Aligns With What Dynamic Asset Does
This is exactly the environment Dynamic Asset portfolios are designed for.
Dynamic Asset’s approach is not built around a single index, a single macro view, or a one-size-fits-all model. It isbuilt around a Total Portfolio mindset - a system where capital is allocated by purpose and timeframe, with multiple mandates designed to work together.
For advisers, this matters because itallows portfolios to be aligned with real client objectives:
Rather than forcing all client capital into a single “balanced” portfolio and hoping behaviour holds up in a drawdown, Dynamic Asset’s mandate structure is designed to reduce fragility and improve decision-making under stress.
In other words, Dynamic Asset is built for a world where capital is selective.
The Adviser Opportunity
For advisers, the implications are clear.
If capital is becoming more selective, then advice businesses need portfolio systems that can support:
That’s not a marketing preference. It’s a business survival issue.
The firms that thrive over the next decade won’t be the ones with the cleverest market calls. They’ll be the ones with the best portfolio architecture - portfolios that can absorb regime change without forcing clients into reactive decisions.
Capital is becoming more selective.
The question for advisers is: are your portfolios built for that world?
To find out about how our range of adaptive DAA managed account portfolios and how our investment strategies are well suited for today's macroeconomic environment - Contact Us.
Disclaimer
This material has been prepared by Dynamic Asset Consulting Pty Limited (ABN 82 079 145 298, AFSL 502623) of Sydney NSW 2000. Any content provided in this Report is for general information purposes only. It is not personal advice and does not take into account the investment objectives, financial situation or needs of any person. Please seek specific advice before making a decision in relation to any investment. Before making any decision about any product you should obtain a Product Disclosure Statement (PDS) or Investment Mandate (IM) document for further information. A copy of our PDS or IM is available from your adviser or by contacting us through our website at www.dynamicasset.com.au