Global Markets Outlook 2026: Stability, Selectivity, and Structural Change

Markets Outlook 2026: Stability, Selectivity, and Structural Change

As the global economy enters 2026, conditions appear more stable than in recent years, though not without complexity. After a period marked by inflation shocks, aggressive monetary tightening, and geopolitical disruption, the macroeconomic environment is gradually transitioning toward moderation. Growth remains positive, inflation continues to ease, and monetary policy is moving closer to neutral across major economies. At the same time, powerful structural forces, particularly artificial intelligence–driven capital expenditure and geopolitical realignment, are reshaping investment landscapes.

Economic and Policy Backdrop

The year 2025 demonstrated notable economic resilience. Despite elevated political uncertainty, trade frictions, and higher tariffs, global growth held up better than expected. Inflation declined across developed markets, allowing central banks to step away from restrictive policy without triggering a recession. Labour markets cooled gradually, supported by productivity gains rather than sharp employment losses.

Looking ahead, global growth in 2026 is expected to remain moderate but constructive. The United States is projected to grow near its long-term potential, supported by sustained investment in data infrastructure, automation, and productivity-enhancing technologies. Europe benefits from easier financial conditions and selective fiscal support, while Asia continues to contribute disproportionately to global growth through domestic demand and technological adoption. Growth remains uneven across regions, reinforcing the importance of selectivity.

Monetary policy is entering a more stable phase. With inflation moving closer to target, central banks are expected to keep policy rates near neutral. In the United States, interest rates are projected to settle in the mid-3 percent range, offering policymakers greater flexibility to respond to changing conditions. While the tightening cycle has clearly ended, the pace and extent of any further easing will remain data dependent.

Labour markets continue to adjust to demographic constraints and technological change. Artificial intelligence adoption has not resulted in widespread layoffs but is reshaping labour demand, particularly in routine and middle-skill roles. Unemployment is expected to stabilise at moderate levels, driven more by structural transitions than cyclical weakness.

Inflation, Fiscal Pressures, and Risk Balance

Inflation is expected to normalise further through 2026, with much of the remaining pressure linked to past tariff effects rather than ongoing demand excesses. While longer-term inflation volatility remains a risk due to demographics, supply chain redesign, and rising public debt, near-term dynamics appear contained.

Fiscal pressures, particularly in the United States, are becoming more visible. Net interest costs on government debt have risen sharply and now exceed defence spending, reducing fiscal flexibility and increasing sensitivity to future interest rate movements. These dynamics underscore the growing interaction between monetary policy, fiscal sustainability, and market outcomes.

Overall, the central macroeconomic scenario points to stability, though the distribution of risks remains wide. Geopolitics, fiscal constraints, and the scale of AI-related capital investment continue to introduce uncertainty, reinforcing the need for diversification and active risk management.

Fixed Income: A More Supportive Role

Fixed income enters 2026 in a stronger position than in previous years. As inflation moderates and policy rates stabilise, bonds once again offer meaningful income and portfolio diversification. The opportunity set is broad, though increasingly shaped by regional divergence.

In the United States, easing inflation and resilient corporate fundamentals support investment grade credit, while intermediate maturities offer attractive risk-adjusted returns. High yield markets remain fundamentally supported but require careful issuer selection, particularly in sectors tied to large capital investment cycles.

Europe presents a more mixed picture, with supportive conditions in core markets and selective opportunities in peripheral sovereigns. Switzerland continues to offer stability and capital preservation, though yields remain limited. Emerging market fixed income stands out for its attractive real yields, particularly in local currency markets where inflation dynamics have improved and central banks have room to ease.

Equities: Leadership with Dispersion

Global equity markets are supported by improving macro stability, easing inflation, and a less restrictive policy environment. Earnings growth remains constructive, though increasingly concentrated among companies and regions best positioned to benefit from technological investment and structural change.

The United States continues to lead global equities, driven by innovation in artificial intelligence, semiconductors, cloud infrastructure, and automation. While market concentration remains high, earnings breadth is expected to improve as productivity gains diffuse across sectors such as industrials, utilities, healthcare, and specialised financial services.

Europe offers stability through established industries, including healthcare, consumer goods, financials, and industrials. However, slower progress in next-generation technologies limits long-term growth potential relative to faster-moving regions. The United Kingdom benefits from the global exposure of its listed companies despite softer domestic conditions, while Japan continues to gain from corporate governance reforms, improving capital efficiency, and structural growth in automation and manufacturing.

Emerging markets enter 2026 with improved fundamentals and supportive external conditions. Demographics, digitalisation, and investment in domestic innovation ecosystems underpin long-term growth, particularly in Asia. Switzerland maintains its role as a high-quality, defensive equity market, supported by strong global franchises and predictable cash flows.

Alternatives and Real Assets

Alternative investments continue to play an important role in portfolio construction. Gold remains supported by geopolitical uncertainty, fiscal pressures, and strong central bank demand, reinforcing its role as a strategic reserve asset. Other precious metals, particularly silver, benefit from both industrial demand linked to electrification and supply constraints.

Commodities and real assets are increasingly shaped by the expansion of AI-related infrastructure. Demand for copper, aluminium, steel, energy, and water resources is rising as data centres, semiconductor facilities, and power networks expand. Infrastructure assets linked to energy transmission, renewables, logistics, and water systems offer stable cash flows and resilience to short-term economic fluctuations.

Digital assets remain volatile and adoption uneven, though long-term holders continue to value fixed supply and independence from monetary systems. Their role remains complementary and risk-sensitive rather than defensive.

Foreign Exchange Dynamics

Currency markets reflect a more balanced global rate environment. The US dollar remains supported during periods of risk aversion but is expected to trade within a narrower range as interest rate differentials compress. The euro benefits from improving fundamentals, while the Swiss franc retains its safe-haven characteristics. The Japanese yen gains support from gradual policy normalisation, and selected emerging market currencies offer opportunities where policy credibility and external balances are strong.