2025 was a turbulent yet resilient year for the global economy, marked by a material increase in tariffs with the aim of reshaping global trade, easing inflation across many regions, rising technology-driven investment in AI and the continued evolution in global order. As we enter 2026, we expect economic momentum to remain positive with strong growth in much of the developed world, most notably the U.S.
Our Global Investment Outlook highlights key themes and opportunities we foresee for the year, diving into the economic outlook for the world's major markets including the U.S. Europe, Japan, the U.K., Canada, Australia and China.
We have identified four key items and themes within our outlook to highlight the most pertinent aspects of our full report, to help in understanding the central macroeconomic forces that will likely drive markets over the year. An opportunity may be created when assets aren't fully priced to expectations.
01
The U.S. effective tariff rate rose dramatically in 2025 from 2.3% in January to 13.5% by the end of the year, a level not seen since early in the 20th century (Figure 1). Looking ahead to 2026, we expect U.S. tariff policy to continue to drive a significant realignment in global trade relationships.
02
The investment expenditure of AI companies continues to grow rapidly. Capital expenditure by the top six U.S. cloud companies alone is expected to be more than $1.3 trillion over the next two years, with a more than 40% increase in 2026 compared to 2025 (Figure 2).
03
Despite geopolitical volatility, we believe cyclical growth will likely continue to be strong in 2026, particularly in the U.S. which looks set to grow meaningfully above trend and current consensus expectations (Figure 3).
04
For the U.S. in 2026, we expect a macro environment that supports a positive outlook for equities but a slightly negative one for bonds (Figure 4).
| 2026 | Federal Reserve | Analyst consensus | Our macro views vs con. | |
|---|---|---|---|---|
| Economics | Real GDP (%Y) | 2.3% | 1.9% | Higher |
| Core inflation (%Y) | 2.5% | 3.0% | In-line | |
| Policy rate (%) | 3.4% | 3.25% | Higher | |
| Return Potential | U.S. equities | - | - | Overweight |
| Manage Risk | 10-year U.S. govt. bond | - | - | Underweight |
| U.S. dollar vs developed FX | - | - | Neutral |
Here are several dynamic asset allocation tilts that reflect the key macro and market themes in our outlook for the next couple of years, and we think will generate value (Figure 5).
As of: 28 January 2026. Tactical = 6 to 24 months. Strategic = 2 to 5 years
| Return potential | ||
|---|---|---|
| Increase: Global equity | Tactical - Med | |
| Why now: AI capital expenditures (capex); supportive policy; Japan reform and wage gains Implementation: Japan/U.S. bias if possible; fund with cash, investment grade credit (IG), or treasuries Risks: U.S. labor market and/or capex disappointments; policy missteps; trade escalation |
||
| Increase: Best ideas alternative credit vs. investment grade credit | Tactical - Low | |
| Why now: Attractive yields after expected losses and costs; broader opportunity set; risks to IG spreads from high AI-related issuance Implementation: Diversified alternative credit sleeve vs. global/country IG credit Risks: Weaker liquidity; mark-to-market stress, idiosyncratic tail risks |
||
| Rates relative value: Increase: U.K. gilts; Decrease: JGBs; Decrease: USTs |
Tactical - Med | |
| Why now: U.K. disinflation + improved fiscal credibility; Japan rates are low vs. high inflation + cyclical growth; U.S. upside growth + inflation risks Implementation: Long U.K. gilts; U.S. treasury inflation-protected securities vs. nominal treasury bonds Risks: U.K.: fiscal deterioration + sticky wages; Japan: policy pivot under new government; U.S.: disinflation from AI-related productivity |
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| Risk management | ||
|---|---|---|
| Decrease: Underweight to downside risk hedging strategies | Tactical - Low | |
| Why now: Downside risks below average; mindful of potential short-term losses from downside hedge assets (equity options, U.S. government bonds) Implementation: Client dependent Risks: Economic slowdown/sharp equity drawdown |
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| Increase: USD hedge ratio (i.e., less USD for non-U.S. investors) | Strategic - Med | |
| Why now: High US dollar and U.S. asset valuations; less supportive policy backdrop for USD Implementation: Adjust currency hedging overlay targets (cost-aware) Risks: Accelerating U.S. exceptionalism; USD-positive global risk-off event |
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Key information: Applicability varies by region, mandate and client type. For additional guidance on our views, position sizing, and implementation, please contact your client consultant.
Positive economic growth is expected across many major countries. The following outlines key takeaways from each market:
For further in-depth insights into these topics, please complete the form to download the full version of our Global Investment Outlook 2026.
David Hoile has been the Global Head of Asset Research since 2006 – it is the economics and capital markets research department for Investments and Willis Towers Watson. His role and team cover a variety of responsibilities, including: research and forecasts for all major economies; asset market forecasts over short and long-term horizons, stress tests and appropriate financial portfolio strategy responses; and analysing the risks and opportunities from climate change and broader sustainability-related trends for economies, industries, and asset markets.
