Its always difficult to predict the future, hind sight is a great teacher. I often think economists make lots of predictions but their predictions are never measured against the outcome. Anyway here is our consensus outlook for 2026 based on a aggregate of views from the IMF, World Bank, Morgan Stanley, Mastercard Economics Institute, BlackRock, and other major forecasts as of late 2025.
Remember the keys to investing are taking a long term view, being well diversified across asset classes and geographic regions and staying the course. Lyfords portfolios meet these requirements.
As we approach 2026, the global economy demonstrates remarkable resilience amid ongoing uncertainties. After navigating trade tensions, policy shifts, and inflationary pressures in recent years, forecasts point to moderate but steady growth. For investors, this environment offers opportunities in equities—particularly U.S. and AI-related assets—while emphasizing the need for diversification, attention to interest rates, and awareness of emerging trends like artificial intelligence and trade realignment.
Global Economic Outlook: Steady Growth with Divergences
Major institutions project global GDP growth around 3.0-3.3% for 2026, slightly below recent years but above recessionary levels. The IMF forecasts 3.3%, while sources like Morgan Stanley and Mastercard anticipate around 3.1-3.2%. This reflects a “soft landing” scenario, supported by easing inflation and accommodative monetary policy.
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- United States: Leading the pack with resilience, U.S. growth is expected at 1.8-2.2%, bolstered by consumer spending, fiscal stimulus (e.g., tax cuts), and massive AI-related capital expenditures.
- Eurozone: Modest recovery to 1.1-1.2%, aided by lower rates and potential infrastructure spending in countries like Germany.
- China: Stabilization around 4.5-4.8%, with stimulus offsetting trade headwinds.
- Emerging Markets: Varied, but overall positive with stronger earnings growth (up to 14% projected) and benefits from a weaker US dollar.
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Inflation is trending downward globally, approaching central bank targets (around 2-2.5% in advanced economies), allowing for policy normalization.
Key Trends Shaping 2026
Several megatrends will influence economies and markets:
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- Artificial Intelligence Boom: AI infrastructure spending is a major growth driver, with hyperscalers like Amazon, Microsoft, and Google projected to boost capex significantly. This could enhance productivity but risks over investment if returns disappoint. We discuss these issues further in our blog Market wobbles and AI Trends in 2025.
- Trade Realignment and Protectionism: Ongoing U.S. tariffs and geopolitical fragmentation are reshaping supply chains, favoring “friendshoring” and regional trade. While tensions have eased somewhat, uncertainty persists.
- Monetary Policy Easing: Central banks are shifting focus. The Federal Reserve may cut rates to ~3-3.25%, the ECB likely holds steady, and emerging market banks gain room for accommodation.
- Fiscal Challenges and Debt: High public debt in advanced economies limits stimulus, while emerging markets show improved discipline.
- Geopolitical and Demographic Shifts: Conflicts, energy transitions, and aging populations add complexity, but also opportunities in renewables and tech.
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Investment Implications: Favour Risk Assets with Selectivity
Equities are favoured over fixed income in many outlooks, with U.S. stocks leading due to earnings growth and AI tailwinds. Analysts project S&P 500 gains of 4-14%, driven by 14% EPS growth.
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- Equities: Overweight U.S. and select AI beneficiaries. Emerging market stocks offer value with potential outperformance from currency gains and inflows. Japan and India stand out for reforms and growth.
- Fixed Income: Attractive yields persist, especially in high-quality bonds. Expect rallies early in the year from rate cuts, but range-bound later.
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Planning Tips for Investors
In this environment of moderate growth, low interest rates and evolving trends its important to maintain a long-term perspective and use a diversified portfolio. We discuss this further in our blog Is now the right time to invest?
2026 promises continued opportunities for prepared investors. While uncertainties remain, the combination of disinflation, technological advancement, and policy support sets a constructive support for good to moderate gains in 2026.