The year gone by has been exceptional in some respects. Global equities touched new highs, and emerging market stocks reached close to their 2021 levels. All this happened despite the US administration’s somewhat unconventional policies, particularly on the trade front, leading to a phenomenal performance of safe-haven gold. 

The fact that assets at both ends of the risk spectrum delivered strong returns is remarkable. More recently, European and Japanese bond yields rose. Interestingly, US yields have risen despite the Fed’s rate-cut cycle. Although the long end of the yield curve is less affected by monetary policy decisions (versus the short end), it is still unusual for both to move in opposite directions. 

Looking ahead, fiscal policy is likely to do the heavy-lifting, particularly in the US, Germany, and Japan, with monetary policy also expected to provide support. Hence, consumption, labour markets, and the inflation environment will drive policy decisions, while artificial intelligence (AI)-related investments will attract greater market scrutiny. All this will happen along with challenges to US exceptionalism:

• Higher income tax refunds set to improve the US growth outlook in H1 2026 slightly, but do not change the prospects beyond that. We have slightly upgraded our 2026 growth projections from 1.9% to 2.0%, but the narrative remains that of below-potential growth. The slowdown in US consumption reflects a softening rather than collapse of the labour market. Additionally, with an eye on the mid-term elections, the Trump administration could spring policy surprises. We expect inflation to matter significantly in a mid-term election year. It may lead to Trump softening his stance on tariffs. 

You can now read the full whitepaper at the link below