The challenge for investors in 2026 will be to sort out the conflicting forces between accommodative (or early-cycle) policy settings amidst a mature (or late-cycle) economic and investment environment, where pockets of speculative froth have taken hold.
Global monetary conditions have been accommodative which has sustained strong asset price inflation. However, there will be many potentially disruptive tail risks to navigate next year, which will heighten financial market volatility next year and require investors to be nimble.
Reflationary policies will spur stronger global growth in 2026, but inflation will also be stronger-than-expected. Bond bulls will again find themselves wrongfooted, which could also cause adverse ramifications for equity markets. In addition, there are risks of a renewed intensification of the trade war, and/or diminishing of the A.I. euphoria.
