Global growth is moderating as the Iran-related energy shock weighs on economic activity. US economic growth is expected to remain solid in 2026 and 2027, but Eurozone and Japanese growth will slow before modest recoveries next year. Chinese growth may be less affected by international developments this year but is forecast to slow slightly in 2027. With higher energy prices now feeding through, we have raised our 2026 inflation forecasts for most major markets and central banks are expected to shift towards a tighter stance.
Although the environment is likely to remain volatile, we expect further equity market gains over the next 12 months. We also see price potential in high-quality bonds in the coming months, in a declining yield environment. Gold, as a portfolio diversifier, should continue to be in demand. We remain constructive on private markets, with hedge funds potentially able to provide some downside protection, particularly during periods of market volatility.
This is the latest edition of our PERSPECTIVES Economic and asset class outlook. It provides a summary update of our economic and asset class views following the quarterly CIO Day. These views are supported by 2026 and 2027 forecasts for GDP growth and inflation, along with 12-month (June 2027) targets for key policy rates and fixed income, equities, commodities and FX markets.
