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.
Outlook at a glance
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.
Figure 4: U.S. in 2026: major views at a glance
| 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 |
Active positioning highlights
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).
Figure 5: Active positioning: highlights
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 |
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| 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.
Macro and market outlooks for major countries
Positive economic growth is expected across many major countries. The following outlines key takeaways from each market:
- U.S.: U.S. GDP to grow 2.5% in 2026; AI and fiscal spending boosts are the major drivers
- Euroland: Germany's fiscal support and steady ECB policy bolster Euroland growth and equities
- Japan: Japan's policies drive strong growth, investment and tighter monetary conditions supporting the yen
- U.K.: Inflation is set to fall in 2026, prompting rate cuts and supporting growth and gilt returns
- Canada: Canada rebounds as fiscal and monetary policy impacts flow through; inflation cools
- Australia: Trend-like growth, a strong labor market and inflation easing; RBA likely range-bound but upside risk to rates
- China: China's 2026 focus – tech self-reliance and tighter governance – likely to produce near 5% growth
For further in-depth insights into these topics, please complete the form to download the full version of our Global Investment Outlook 2026.
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In this Pensions Perspectives episode, we discuss the Global Investments Outlook 2026, distilling key themes that shaped 2025 markets and what we should keep top of mind as 2026 unfolds.
