Mike Coop, Chief Investment Officer for EMEA at Morningstar

Investors have long accepted that markets are uncertain. What is becoming increasingly clear, however, is that uncertainty itself is changing – and with it, the way portfolios need to be constructed.

Speaking at a recent investment forum, Morningstar’s Chief Investment Officer for EMEA, Mike Coop, argued that the investment environment is not simply volatile, but structurally harder to predict.

“The world is becoming too uncertain to be overly reliant on predictions and forecasts,” he said.

A more fragmented global backdrop

Coop pointed to two major forces reshaping markets.

The first is geopolitical. The shift away from a rules-based, multilateral system towards a more fragmented world has increased the influence of political decision-making on financial markets.

“We’ve moved to a world where decisions by a small number of leaders can move markets significantly – equities, bonds, currencies, commodities.”

These dynamics introduce unpredictability that is difficult to model using traditional economic frameworks.

The second force is technological. Advances in artificial intelligence are accelerating the pace of change across industries, compressing timelines and creating uncertainty around future winners and losers.

“The pace of change is accelerating. What these technologies can do is very rapidly shifting competitive advantages stripping some businesses of theirs and building up powerful barriers for others,” Coop noted.

Together, these forces are making it increasingly difficult to anchor investment decisions on a single view of the future.

Rethinking the role of forecasting

In this environment, Coop argued for a shift away from forecast-driven investing towards a more probabilistic mindset.

“You can’t anchor on one scenario. You need to think about multiple scenarios and probabilities.”

This represents a fundamental change in approach. Rather than attempting to predict what is most likely to happen, investors need to consider a range of outcomes – and how portfolios behave under each. The focus shifts from being right to being prepared.

This has important implications for how risk is understood. Risk is no longer just volatility or market drawdowns, but the danger of building portfolios that are overly dependent on a single outcome that may not materialise.

Finding opportunity in uncertainty

While this environment presents challenges, it is not without opportunity.

Periods of uncertainty and disruption often lead to mispricing as markets react to new information. These dislocations can create entry points for investors able to take a longer-term view.

“The movements in markets are large – and that creates opportunities,” Coop said.

He noted that volatility, while uncomfortable, can allow investors to acquire assets at more attractive valuations than would otherwise be available. The challenge lies in identifying which opportunities are meaningful, and avoiding the temptation to react to every market movement.

The importance of breadth

Navigating this environment requires access to a wide range of insights. Coop highlighted the importance of broadening the research universe – across geographies, asset classes and sectors – to increase the likelihood of identifying mispriced opportunities.

“The broader our research base, the more opportunities we can uncover,” he said.

This reflects a shift in where value is created. Increasingly, it is less about selecting individual securities within a narrow universe, and more about identifying relative value across a much wider set of opportunities.

Discipline, not conviction

Perhaps the most striking aspect of Coop’s commentary was the emphasis on humility in decision-making.

In an environment where outcomes are harder to predict, conviction alone is not enough.

“We’re all human, we all have biases,” he said, pointing to the need for structured processes that challenge assumptions and improve decision-making.

This includes:

• testing ideas rigorously
• considering alternative viewpoints
• and ensuring that decisions are not driven by overconfidence or incomplete information

In this sense, Coop argues the advantage lies not in having stronger views, but in having better processes.

A more resilient approach

“Rather than constructing portfolios that perform well under one expected outcome, the goal is to build portfolios that can withstand a range of possible futures. This does not eliminate uncertainty – but it does provide a framework for managing it more effectively,” said Coop.

ENDS