Highlights: Market-cap weighted benchmarks amplify expensive AI stocks, creating concentration and abandoning the diversification that active managers usually prioritise. Geopolitical risks continue to undermine valuations, risking prolonged high energy costs, driving persistent inflation, and rising interest rates that increase discount rates and reduce the future value of expensive stocks. Strong first quarter earnings have fuelled near-term AI optimism, but escalating inflation and interest rate risks create a fundamental tension. How this resolves will be critical for investors choosing between chasing concentration or maintaining disciplined diversification in 2026.