The ASX 200 is widely expected to grind higher toward roughly 9,300–9,500 by the end of 2026, but the path will likely be driven more by sector choices than by the headline index. Materials have the strongest earnings tailwind, banks look like a lower‑beta income anchor, and tech remains the highest‑risk way to play growth.[1][2][3]
Materials: earnings doing the heavy lifting
In 2025, materials were the clear standout on the ASX, with sector gains around 25–32 per cent driven by strength in gold, copper and critical minerals rather than just the big iron ore names. Strategists at Morgan Stanley argue the “case for a sustained Materials rotation remains intact” into 2026, citing above‑consensus metals price forecasts, a weaker US dollar and resilient bulk commodity demand, which together give resources an outsized impact because they are roughly 19 per cent of market cap but close to 28 per cent of index earnings. If China’s move out of deflation and global GDP stabilising near 2 per cent play out as expected, materials are the sector most obviously justified by fundamentals rather than just multiple expansion.[2][4][3][5][1]
Banks: yield, capital and not much growth
By contrast, the big banks have behaved more like a defensive “safe haven” than a growth engine, with the financials sector up only about 3–4 per cent in 2025 after a weak November. Morgan Stanley’s 2026 outlook notes that bank share prices have already rerated on the back of EPS upgrades and strong balance sheets, meaning current levels reflect “all the benefits of this easing cycle” before most rate cuts have actually arrived. The sector still offers fully franked yields and relative stability if growth wobbles, but with domestic cyclicals likely to stay soft and credit growth moderate, banks look more like a[1][2]
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always consult with a qualified financial advisor before making investment decisions.