Robust economic growth is expected due to solid consumption and sizeable investment, although geopolitical tensions could act as a drag. We see stable sequential quarterly growth in the US in 2026, while in the Eurozone extensive German fiscal stimulus should keep growth near potential. In Japan, the government’s pro-growth policy will help sustain robust economic activity. Policy support for strategic industries and households will continue in China.
On investment, we argue that discipline will continue to beat drama. Equities started the year on a strong footing and, despite recent reverses, are still on track for future gains. A strong earnings outlook is supportive and sectoral strength is broadening. On fixed income, deficits are keeping the US long end elevated but investment grade is steady despite AI disruption risks. Recent events in the Middle East and investors’ reactions have underlined the case for gold; oil remains fundamentally well-supplied but more short-term price spikes are possible. In FX, previous USD weakness has not been sustained but future possible headwinds from asset diversification are still relevant.
