Navigating a Fragmented World: 2026 Market Outlook

Excess global liquidity, gradual disinflation, and continued investment in structural themes, most notably artificial intelligence and strategic infrastructure, are expected to underpin growth in the year ahead. While cyclical momentum remains uneven and risks around valuation, geopolitics, and policy execution persist, the baseline outlook points to continued expansion rather than disruption. For investors, 2026 is shaping up not as a year of broad macro shocks, but as one that will reward selectivity, disciplined risk management, and a focus on long-term structural opportunities amid an increasingly fragmented global order.

Intro

After the global economy weathered the political upheavals of 2025, 2026 should be another year of resilience for the US, continuing to support risky assets – stocks and corporate credit. However, cyclical economic impulses remain moderate: the economy is developing in a K-shaped pattern, creating a typical situation where, after an economic downturn, different groups in the economy develop at different rates and in opposite directions. In this case, consumers with reduced and low incomes are under pressure but continue to consume, while significant interest rates across economic sectors (e.g., the housing market) represent a significant part of the macroeconomic landscape. This state is often unsustainable and leads to convergence – either the lagging sectors begin to catch up with the growing ones, or a developing recession occurs.

Evaluating the performance of major stock indices in 2025, the following can be noted: The global MSCI World index rose by 21%, the S&P 500 by 18%, the Nasdaq 100 by 22.7%, and the Chinese CSI 300 by 21% (in dollar terms). Among the unexpected leaders are the Tel Aviv 35 Index with its staggering 67% in dollar terms, as well as the Spanish IBEX 35 with 66% and the African JSE Africa Top 40 with 56%. Among the weakest performers are the Saudi Tadawul All Share with -8% and the Qatar Exchange Index with +6%.

"Sensible regulation" remains a significant theme for US markets, including the banking sector, private equity, and private credit. Interest rate volatility may periodically flare up throughout the next year, so investors should remain flexible in managing their expectations regarding future returns and average asset holding periods.

The range of risks surrounding the baseline forecast for next year is wide – both for investors and for the Fed, which will likely continue to normalize interest rates for some time, but at a very slow pace, given the risks to both sides of its mandate (ensuring effective levels of inflation and employment necessary for economic growth). However, there are certain problems with the employment figures: since the start of the US government shutdown, updated information on some employment indicators has not been published since September.

In debt markets (bonds), instead of trying to perfectly time yield levels, it is preferable to focus on coupon income from debt instruments, especially those backed by the stable financial position of individual corporations and/or municipalities. In the equity segment, we continue to see the greatest potential not in cyclical but in structural themes. Investments in artificial intelligence and its widespread adoption remain a dominant force supporting economic growth and corporate profit growth in the US – and increasingly beyond (especially in emerging Asian markets). The AI theme also continues to fuel both public and private markets, but the key task for investors is to stay ahead of the market in identifying long-term winners, especially given that expectations have risen significantly and attention is shifting to the return on investment in the AI sector. Of course, the AI theme is also a major source of risk but given the market dynamics over the past few quarters, we tend to focus on structural themes into which the largest amount of capital is flowing.

We can identify at least several promising investment themes for the coming year – direct beneficiaries of capital infrastructure spending on AI with transparent monetization, beneficiaries of increased consumption, beneficiaries of fiscal stimulus, and also a weak dollar (companies with a large share of revenue outside the US). In this context, among the possible growth leaders, we highlight semiconductors, large banks and some parts of the financial sector, online retail and consumer services, and the defense sector; among potentially weak sectors are real estate, cyclical sectors (food and chemical sectors), and a moderately weak energy sector.

Outside the US, we expect other structural factors to help narrow the gap in earnings growth rates compared to American companies. These include higher nominal growth, increased government investment, and a focus on shareholder returns. These factors, along with a weak dollar and still low expectations, create the conditions for another strong year in international stock markets, primarily in Asia among emerging market countries, as well as for still undervalued sectors of the economy in Europe and Japan.

The main risk for investors remains the same – high valuation levels of risky assets relative to historical values (especially in the US), and the extent to which investors' portfolios have proven unprepared for the expansion of the range of income-generating assets. As 2025 showed, diversification can come back into fashion rapidly and aggressively. Investors should take this lesson into 2026 – a year that may look prosperous on the surface, but in which achieving progress will require particularly careful work, analyzing the underlying processes within individual economies against the backdrop of deglobalization and the politicization of economic trends.

Risks

Although trade tensions between countries have not disappeared, further volatility in this area is likely to be one of the themes of 2026. Indeed, the relatively favorable economic forecasts for developed economies in 2026 risk not being realized. This creates risks primarily for stock markets, which have already gone from a decline of approximately 15% (in the case of the US) after "Liberation Day" to a growth of almost 18%.

The risks of recession in developed economies remain low on the eve of 2026, as there is no specific negative driver on the horizon. However, geopolitical uncertainty, in our opinion, remains high. Eurozone economic growth is most likely to slow compared to 2025 rates, despite some acceleration in the region's largest economies, especially Spain and Germany. No significant improvements are expected in the UK or Japan. Although no significant acceleration in GDP growth is projected in the US either, the pace of the American economy will again be noticeably higher than in most developed countries. This will be supported by favorable financial and fiscal policy conditions, an investment supercycle in artificial intelligence, and a small increase in labor productivity. The recovery in consumer demand will also be based on these factors, although many analysts note the risk of a K-shaped growth dynamic among different income groups of the population.

Despite the expected trajectory of economic development, risks exist on both sides. We are only in the first year of a new administration (the first year of the US president's term), there are midterm elections ahead (low presidential approval ratings create an incentive for possible fiscal initiatives), trade tensions between the US and China remain unresolved, as do legal disputes surrounding the broader tariff complex. In addition, attention will be focused on the Fed amid the end of Chairman Powell's term and potential changes in the leadership structure. This is important not only from the perspective of the likelihood of a more lenient monetary policy, but also because of the risk of undermining confidence in a key institution.

Next Year

First and foremost, it's important to note that 2025 is not yet over. Central banks will make their final monetary policy decisions in December. The Fed is expected to cut rates by 25 basis points at its December meeting (already did), while the Bank of Japan, conversely, is expected to raise rates by 25 basis points. Ultimately, our forecast for the total number of remaining Fed rate cuts until the end of 2026 (three cuts) remains unchanged, but we now expect the first cut to occur sooner. In a broader context, 2026 will likely be the final stage of the rate-cutting cycle for most major central banks, including the Fed, the ECB, the Bank of England, and the Bank of Canada.

Regarding the dollar, our view on further moderate dollar weakening remains unchanged. Currency markets have once again returned to their correlation with short-term interest rates and their differences in currency pairs. Fed interest rate cuts until the end of next year will likely be a key factor putting pressure on the dollar, especially given that other central banks are close to completing their easing cycles. Our baseline forecast for major G10 currencies suggests an EUR/USD exchange rate of 1.21 by the end of 2026.

Among developed economies, we expect the divergence in growth rates to continue: the US will outperform the Eurozone and Japan. Although the new policies of the Trump administration represent a moderate stagflationary shock, the US economy is showing signs of accelerating productivity growth, and we expect the momentum from artificial intelligence-related investments to continue.

2026 will be a test of the global economy's resilience in the face of the ongoing transformation of the global order. Excess global liquidity is pushing asset prices higher, geopolitically driven policy uncertainty is becoming the rule rather than the exception, making supply shocks more frequent, and the artificial intelligence boom is having a heterogeneous impact on economies. We expect that all these imbalances will be resolved without disruptive consequences, the global economy will accelerate growth, inflation will bottom out, and central banks will be nearing the end of their policy easing cycle. However, if the imbalances intensify or are resolved in a destabilizing way, the risks to global growth could be significant.

Artificial Intelligence

Despite the rapid growth of interest in artificial intelligence and its key role in the stock market dynamics of recent years, the impact of AI on the real US economy remains limited. Large-scale investments in AI infrastructure have increased even further, as a significant portion of the components are imported, and productivity growth has not yet shown any tangible acceleration. To justify current stock valuations, AI must provide sustained growth in corporate profits, but there is a risk that the economic effect will be comparable to low-margin industries such as air travel or shale oil production.

The slowdown in free cash flow of the largest technology companies may signal the approaching end of the current AI boom. While the decline remains moderate, its intensification could trigger a correction in the stock market. In other words, the "AI era" is everywhere in the news and investment strategies, but practically invisible in productivity statistics. Companies report increased use of AI in operational tasks, layoffs are increasing, but there is no direct correlation with this being solely due to labor productivity. And this gap forms the main risk for the markets in the coming years.

This is the main request of institutional investors regarding the AI theme – a clearer path to monetizing investments in AI infrastructure. Especially in cases where there is no government support for these investments. This is especially important for US stock indices, where robust growth is provided by a narrow range of stocks significantly exposed to the AI theme. For US market returns to be sustainable again in 2026, they need to be supported by profit growth in sectors outside of AI, especially if the "AI hype" takes a break.

Commodities

After strong growth in 2025, when the BCOM (commodity index) gained about 12%, and precious metals showed almost parabolic dynamics, the structure of demand and the balance of risks in commodity markets are gradually changing. In 2026, the key factor will be the different trajectories of cyclical and structural drivers across individual commodity groups.

Gold. The fundamental factors that supported the market in 2025 remain: the ongoing process of de-dollarization, the complex fiscal position of the US, high demand from central banks, and inflows into physical ETFs remain important elements. However, for the first time in several years, the probability of consolidation is increasing: improved economic expectations in the US against the backdrop of the administration's stimulus measures and a restoration of confidence in the independence of the Fed could shift the balance towards more neutral dynamics. Although this scenario is accompanied by several counterarguments and is unlikely to unfold smoothly. In the base case scenario, gold will spend most of 2026 in a range, although there remains a possibility that extreme demand will again trigger a bullish phase – with the potential to move above $5,000 per ounce if macro and geopolitical risks intensify.

Precious Metals. 2025 was a period of sharp improvement in the financial performance of gold mining companies: strong balance sheets, low costs, and high free cash flow transformed the sector. In 2026, most of these trends will continue, but new emphases will emerge: moderate growth in operating costs, the impact of energy prices, and possible increased M&A activity as liquidity accumulates on company balance sheets. At the level of individual companies, the strongest argument is that gold mining companies, against the backdrop of rising gold prices, have significantly improved their net cash flow and, in general, have a more attractive investment prospect. Among them, one can single out large players – Barrick Mining, Alamos Gold, and Royal Gold.

Base Metals. We expect the bullish momentum to gradually shift from precious metals to copper and aluminum. These markets are receiving simultaneous support from structural demand related to energy transition and limited supply increases. With continued global stimulus and improving global trade conditions, both metals have the potential for further growth in 2026.

Energy Resources. Brent crude oil, in our estimation, will trade in the range of $55–65 per barrel amid increased supply from both OPEC and non-OPEC producers. The situation surrounding Russia and Ukraine will have a significant impact: an end to the conflict could reduce oil premiums by $10–15 and lower commodity prices by a further few dollars per barrel. The US gas market remains sensitive to weather factors and domestic demand, while European prices are likely to remain under pressure from high gas supplies.

Uranium. Uranium remains one of the most structurally constrained commodity markets entering 2026. The fundamental imbalance between long-term demand growth and limited primary supply has not been resolved. Reactor restarts in Japan, life extensions across the U.S. and Europe, and new nuclear build programs in China, India, and the Middle East continue to tighten the demand outlook. At the same time, secondary supply sources are declining, while new mine development remains capital-intensive and slow, constrained by permitting and geopolitical risks. In the base case, prices are likely to remain volatile but supported above marginal cost levels, with utilities increasingly forced to secure long-dated contracts rather than rely on spot availability. Upside risks are asymmetric: any disruption in major producing regions or acceleration in nuclear policy support could trigger sharp price spikes.

Conclusion

As 2026 approaches, the global investment landscape appears supportive but far from straightforward. Excess liquidity, moderating inflation, and the late stages of the global easing cycle create a constructive backdrop for risk assets, yet the path forward is increasingly defined by dispersion rather than uniform growth. Structural forces like artificial intelligence, infrastructure investment, energy transition, and geopolitical realignment are reshaping return profiles across regions and sectors, while traditional cyclical dynamics play a secondary role. For investors, the central challenge will not be capturing broad market beta, but navigating elevated valuations, asymmetric risks, and a narrower margin for error. The coming year is likely to reward portfolios that combine selectivity with resilience: emphasizing durable cash flows, clear monetization paths, and exposure to long-term capital allocation trends, while maintaining flexibility amid policy uncertainty and geopolitical fragmentation. In this environment, disciplined positioning and a focus on underlying fundamentals will be essential, not only to participate in continued expansion, but to preserve capital should latent imbalances resolve less benignly than expected.

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