Last year was about the turn; 2026 is about the beginning of a long journey. From the promises of artificial intelligence to the mutation of geopolitics, a nascent new world will test the limits of the old one.
We expect volatility but see plenty of opportunities for patient investors with vigilance and selectivity.
Group Chief Investment Officer
Head of Asset Allocation
Head of Fixed Income Strategy
Head of Equity Strategy
Acting Group Head of Research and Chief Economist
2026 should continue to see moderate economic growth, gradually slowing, with the US showing impressive resilience supported by strong corporate investment, especially AI related, and fiscal tailwinds for consumption. While global trade is expected to moderate as the world adapts to tariffs, the overall picture is not completely adverse. Visibility remains limited, with potential US labor market softness posing risks, while inflation could remain a key concern for policymakers.
G20 economies face strained fiscal positions, and leaders may favor short-term measures. The GCC stands out with higher visibility, benefitting from robust non-oil growth, and is expected to show stronger growth in 2026 on aggregate.
We expect the record volatility of 2025 to be the new normal rather than an exception in 2026, with limited macro visibility and potential market anxiety on debt sustainability for some governments or projects. Inflation concerns, which are currently out of the equation, could also come back from time to time.
Our fair value exercise suggests a year where fixed income returns should be close to their coupons. Having said that, volatility should provide opportunities to enhance returns by adjusting duration or even credit exposure.
We start the year with an overweight of emerging market debt: from the classic dollar denominated debt to some specific opportunities in local currencies, as well as the “safe haven” of GCC bonds.
We are neutral on high yield, as the current spreads provide a margin of safety which should secure good absolute and relative returns, unless a major “black swan” event happens. By contrast, we do not see a relevant advantage from corporate credit as compared to government bonds. We also highlight in our publication the benefits of a ladder structure in a bond portfolio.
After a three-year bull run, we expect positive but more moderate, earnings-led equity returns of around +10% for global equities, expressed in US dollars. The macro backdrop is supportive but at least partially priced-in by overall rich headline valuations.
The good news however is that headline valuations hide massive dispersion. We see relatively greater opportunities in emerging markets than in developed markets, backed by relatively attractive multiples and improving earnings momentum. One more piece of good news is that we believe the AI cycle remains intact, entering a phase of broader, multi-sector and multi-region adoption.
We start the year with a preference for the United States in developed regions and China in emerging ones. Our publication highlights our thematic picks, from memory and agentic AI to banks in Japan, tech in China, defense in Europe and global mining. We are prepared to adjust our exposure and selection in what should be another very dynamic and volatile year.
