Global Market 2026 Outlook: Executive Summary
- Harun Ifty
- Jan 10
- 2 min read
Monetary Policy
Divergent central-bank easing paths will be the dominant macro driver in 2026. While the Federal Reserve is projected to deliver a cumulative 25-50bps of cuts, the Bank of England is likely constrained to around 75bps, reflecting persistently sticky services inflation that remains above target. This asymmetric easing cycle should place downward pressure on the U.S. dollar while keeping UK financial conditions relatively tight. The resulting policy divergence sets up the year’s most important FX and cross-market relative-value opportunities.
Equities
Equity market performance in 2026 will depend on whether leadership can broaden beyond the last cycle’s narrow winners. Defence primes (e.g. LMT, NOC) and quality technology firms with proven AI monetisation remain structurally resilient, but sustained upside requires earnings durability to rotate into cheaper cyclicals and industrials, particularly in Europe and Japan. In contrast, the UK’s “managed decline” continues to favour internationally exposed firms over domestic plays. The optimal positioning is therefore a barbell strategy: core exposure to durable structural themes alongside selective, valuation-driven cyclical recovery trades.
FX
A softer U.S. dollar environment creates the highest-conviction macro-opportunity in high-quality EM carry trades. Strategists increasingly favour currencies such as the INR, IDR, and MXN, offering 300–500bps of yield pick-up over G10 alternatives while being underpinned by reform momentum and improving macro fundamentals. This contrasts sharply with more fragile EM peers, such as the BRL, where fiscal risk undermines carry sustainability. As a result, long EM carry funded in USD emerges as a consensus, structurally supported trade for 2026.
Geopolitics
Geopolitics has transitioned from episodic event risk to a source of structural repricing across assets. U.S. hemispheric assertiveness (notably Venezuela), intensifying resource competition in Africa, and emerging Arctic tensions around Greenland are no longer transient shocks but persistent features of the global order. These forces embed long-lasting risk premiums into supply chains, energy security, and logistics networks, structurally benefitting defence, critical infrastructure, and strategic commodity assets. Investors must therefore price in enduring volatility, rather than treating geopolitical risk as a temporary headline effect.
Commodities
The global commodity complex is becoming increasingly divided into two. Scarcity-driven metals such as gold and copper remain supported by constrained supply and the demands of energy transition, while oil and LNG face a growing medium-term supply overhang despite near-term geopolitical risk premiums. This divergence renders broad-based commodity ETFs inefficient, as performance will hinge on specific physical tightness rather than macro beta. Effective exposure in 2026 will require selective positioning focused on scarcity-driven narratives rather than blanket energy allocations.
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