Against a backdrop of volatile geopolitics, tariffs, and policy shifts, the global economy enters 2026 with surprising resilience.
Growth forecasts have been revised upwards. Across regions, however, the outlook is marked by diverging paths.
For investors, we believe that asset allocation in 2026 will be shaped by the interplay of monetary policy, fiscal dynamics, and evolving market structures. Hence, flexibility and selectivity will be essential as markets adapt to greater fragmentation across the global economy.
Macroeconomic outlook
Despite initial jitters in the aftermath of the US administration’s ‘Liberation Day’, the global economy has proved surprisingly resilient. As we move into 2026, we see markets in a much more positive frame of mind about the growth outlook, but one that varies from place to place.
In Europe, the economy looks set to regather momentum, whereas in the US, genuine uncertainty persists about how the Federal Reserve will navigate the economic currents and political backdrop. China’s focus will be on medium-term gains while realigning its investment-driven growth strategy.
Outlook for financial markets
Looking ahead, fixed income markets are poised to benefit from ongoing central bank easing in 2026, with lower interest rates anticipated in the US and Europe. While sovereign debt yields may face upward pressure from rising government deficits, the environment remains supportive for credit markets.
Meanwhile, equity markets continue to be technology driven, with tech company earnings expected to grow robustly as AI fuels capital expenditures. In emerging markets, nations with strong tech sectors stand to benefit from lower US yields and dollar weakness, though export-oriented economies may face headwinds.
