Uncertainty abounds as investors head into 2026, with geopolitical risks and economies weighed down by tariffs and other policies potentially derailing a fragile global economy.
But there are also plenty of signs of promise. Interest rates should ease at pace in developed markets and fiscal stimulus should remain supportive.
With all this in mind, Trustnet looks at the macroeconomic outlook for 2026, with comments from experts at Invesco, Aberdeen and other top asset managers.
The global economy
Most experts agreed that the current strong economic cycle in 2025 will continue next year, with Peter Branner, chief investment officer at Aberdeen, suggesting the current status quo will “roll on for now”.
Invesco chief global market strategist Brian Levitt noted that the economy was “remarkably resilient” in 2025, something he expects to continue this year.
According to the firm, global growth is projected to ease slightly below 3%, a level often considered the long-term trend for global GDP.
The sharpest slowdown is in the US, where GDP growth is set to decline below its long-term rate of 2%, driven by elevated long-term interest rates that are dampening consumption, as well as tariff uncertainty (more on that later).
Invesco multi-asset manager David Aujla added that labour market conditions have also softened, with employment growth falling well below the historical average of 150,000–200,000.
“However, in our view, this low-growth environment lacks the negative momentum, tightening credit conditions, and deteriorating consumer sentiment that have historically been key catalysts for turning slower economic growth into a proper recession,” he said.
“Instead, the structural tech super-cycle, renewed fiscal policy stimulus, modestly easing monetary policy, and the gradual de-escalation of global trade tensions appear to be significant tailwinds, sufficient to offset the weakness in other areas such as manufacturing, housing, trade and overall employment – for now.”
Pictet Asset Management chief strategist Luca Paolini and multi-asset strategist Arun Sai agreed, suggesting global equities should return around 5% this year as a result.
“Broadly speaking, we expect world GDP to grow at 2.6%, roughly in line with its long-term trend rate, which will limit inflationary pressures. Indeed, investors have turned more optimistic about growth and less pessimistic about inflation,” they noted.
Interest rates
Much has been made of interest rates over the past year and they will likely dominate the market again in 2026, although all experts expect developed central banks to make sweeping cuts.
Brunner said the Federal Reserve will cut “a few more times” this year, with Paolini and Sai suggesting both the Fed and Bank of England will “deliver two rate cuts each in 2026”.
“This easing is critical for manufacturing-heavy economies, as lower funding costs historically boost industrial growth,” they noted.
However, one key risk heading into the year is a more hawkish Fed, which could delay or cancel rate cuts if inflation proves stickier than expected. This is not priced in, however, as many expect president Donald Trump to appoint a more dovish chair when incumbent Jerome Powell steps down in May.
Man Group chief market strategist, Kristina Hooper noted, however, that some central banks are on different paths to others.
The Fed is managing recessionary pressures while managing persistently higher inflation, which could limit its ability to cut. Meanwhile, the Bank of England is benefiting from softer inflation prints, which could allow it to be bolder.
In Europe, the European Central Bank (ECB) faces inflation that is close to target, so “is likely to hold steady on monetary policy but has the flexibility to address any weakness”, while in Japan the Bank of Japan is in the process of slowly normalising from an ultra-accommodative policy stance that has been in place for many years.
Tariffs
Much of last year was spent talking about Trump’s tariffs. It kicked off in April with his ‘Liberation Day’, with sweeping charges imposed on many countries. After months of negotiations, headlines simmered down towards the end of the year but remained a constant threat lurking in the background.
Capital Group chief investment officer Martin Romo said tariff uncertainty should continue to fade in 2026 as new trade agreements take hold.
“The US effective tariff rate has stabilised near 10%, encouraging renewed capital spending and supply chain investment,” he said.
Not all were as positive, however, with Aujla noting: “While it appears that we have moved past peak conflict for now, ongoing structural tensions and trade disputes continue to fuel concerns over inflationary pressure and supply chain disruption.”
Base cases
Several experts revealed differing bases cases for the year. At Pictet, Paolini and Sai said the most probable (with a 25% chance of happening) was that markets would “melt up”. This narrowly beat the chance of a major market correction (20% likelihood).
There remains scope for a “final bout of retail euphoria” about the artificial intelligence (AI) industry’s prospects that could drive the market higher still, they said.
“That’s truer still if the Fed is pushed by the US administration to cut interest rates aggressively, flooding the market with liquidity.”
For Florian Ielpo, head of macro, multi asset, at Lombard Odier, the outlook is equally rosy. “Our base case anticipates growth and inflation returning to sustainable levels: around 1.5% growth and 2% inflation in developed markets and 3.5% growth in emerging economies,” he said.
“This shift should create a more balanced environment for markets, improving prospects for fixed income from carry and stabilising earnings for equities.”
However, not all were as positive. Hooper suggested the base case at Man Group was for a mild US recession, driven by tariffs, immigration policy and increased unemployment.
China may encounter stable to slightly lower expansion, while the UK is “prone to experience flat or slightly dampened growth”.
There was some positive news, as the eurozone and Japanese economies are expected to accelerate from increased fiscal stimulus.
In a downside scenario, policy errors, coupled with a major drop in artificial intelligence (AI) capex investment, could push the US into a relatively deep recession, while in the most bullish outcome, trade wars end and AI capex investment continues to increase.