Investors are coming into 2026 with optimism on the back of strong global economic fundamentals and an improving global outlook for earnings expectations.
Barring a major curveball shock, we could see further equity market gains as investors focus on economic momentum and further interest rate cuts.
Looking back over the last five years, we’ve suffered through a pandemic, an inflation outbreak, an aggressive shift in the interest rate cycle, war in Europe, and an AI related rally in equity markets. And yet, despite this, the global economy appears resilient and global markets have delivered exceptional returns showing the dynamism of companies being able to constantly adapt.
With this backdrop in mind, there are eight themes in 2026 which guide how we are thinking about the world, how we are positioning our portfolios, and where we are looking for new investment ideas.
1) Steady economic footing – economists are forecasting a robust year for the global economy, with inflation remaining under control and growth broadly in line with 2025.
2) AI: discernment – following a year in which AI-related companies have garnered significant excitement, 2026 could well be the year that the market becomes more discerning when it comes to poor fundamentals.
3) AI’s second-order: solving the constraints – limited resources such as water and electricity are huge constraints to the growth of AI, so we expect attention to turn to building the traditional infrastructure, like power and water, needed to support the rise of AI.
4) US economic growth – away from AI, the US economy appears resilient which supports a healthy outlook for earnings growth in 2026.
5) US dollar: dominance or debasement – following a knock in confidence towards “American Exceptionalism”, 2025 saw material weakness in the US dollar which may yet continue into 2026 as the Federal Reserve continues to cut interest rates more quickly than other western central banks.
6) The ‘Geopolitics’ era – an increasingly engaged US president is trying to put his mark on the world meaning geopolitics is firmly back in the driving seat; this may bring unforeseen threats and opportunities in 2026.
7) Governments vs bond markets – every major global economy is set to increase its borrowing in 2026; will bond markets absorb this borrowing or will bond vigilantes strike back?
8) Asia’s moment – improving fundamentals and relatively cheap valuations across both Japan and the wider Asia Pacific region have lifted the market’s expectations for the Far East in 2026.
While 2026 is set to be an eventful year, several ‘curveballs’ could fundamentally alter the investment landscape:
– With a period of high inflation not far behind us, there are concerns in the market that inflation could misbehave and remain higher than forecasted.
– It’s impossible to ignore the ongoing confrontation between the US and China; a comprehensive geopolitical truce could be just as likely as a military conflict in Taiwan and each scenario having untold consequences for markets.
– The US Midterm elections will be a pivotal event this year. Expectations are for Republicans to lose control of Congress which could lead to legislative gridlock. But if Republicans defy expectations and retain their clean sweep, President Trump will have another two years to accelerate his political agenda.
– Whether AI is a bubble or not is one of the most talked about questions in the market. If the build out of AI infrastructure can translate into a measurable improvement in productivity and economic growth, the current high valuations will become justified, and we could see a structural bull market.
To summarise, the economic picture going into 2026 looks resilient. Markets are expecting a reasonable level of global growth and inflation is expected to behave. In the absence of a curveball derailing the prevailing market narrative, we believe 2026 should be another good year for markets.
» Explore a more in-depth investment outlook from our investment team here.
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Please remember, this content is provided for information purposes only. Investment involves risk. Past performance is not a guarantee or indication of future results. Investment return and the principal value of an investment may go up or down and may result in the loss of the amount originally invested. All investors should seek professional advice prior to any investment decision, to determine the risks associated with the investment and its suitability.
