After a year of tech-fuelled rallies, trade shocks, and fiscal brinkmanship, 2026 offers both promise and peril. Here’s what investors need to know and our outlook for 2026.
Read this article to understand:
- How AI, tariffs and deficits will interact in 2026
- Our expectations for growth over the year
- What it means for investors
If 2025 proved anything, it’s that markets thrive on momentum. AI powered equity gains, trade wars rattled global stability, and governments leaned hard on deficit spending.
As we enter 2026, the question isn’t whether these forces will persist but how they’ll interact, and what that means for portfolios.
AI momentum builds, but clouds gather
Tech and AI were the undisputed growth engines of equity markets in 2025. Hyperscalers and AI-exposed sectors captured the lion’s share of returns, pushing global equities (MSCI ACWI) up 7.5 per cent.
But behind the optimism, concerns mounted. AI-related capex surged to €414 billion, a 44 per cent jump from 2024, as firms raced to secure dominance. Debt-funded spending raised questions about sustainability, and by year-end, bubble talk grew louder. Alphabet soared 26 per cent in Q4, while Meta slumped 11 per cent, signalling a market increasingly focused on separating higher and lower performers in the AI arms race (see Figure 1).
Figure 1: Higher and lower performers (per cent)
Past performance is not a reliable indicator of future results. The companies mentioned are for illustrative purposes only, not intended to be an investment recommendation.
Source: Aviva Investors, Bloomberg. Data as of December 31, 2025.
US tariffs shake global stability, while governments embrace “buy now, pay later” fiscal policy
“Liberation Day” unleashed volatility as the US administration’s unilateral tariff blitz sent shockwaves through global risk sentiment. The S&P 500 plunged 15 per cent in April, reflecting heightened uncertainty and tighter financial conditions.
Although negotiations later softened the blow, tariffs still surged from 2.5 per cent at the start of 2025 to 15 per cent by year-end. Tariff revenue ballooned to $280 billion, up from $77 billion in 2024, fulfilling a campaign promise but leaving investors to question the levies’ long-term cost to US growth.
Meanwhile, fiscal fireworks lit up 2025. The US government shutdown and debt-ceiling drama underscored the tension between short-term politics and long-term sustainability. Treasury markets reflected the strain: the 30-year yield climbed, even as policy rates fell by 75 basis points (see Figure 2). Europe wasn’t far behind. France, Germany and the UK leaned on deficit spending to fund energy security and industrial policy.
Figure 2: Divergence of the curve (basis points)
Past performance is not a reliable indicator of future results.
Source: Aviva Investors, Bloomberg. Data as of December 31, 2025.
Investors pile into gold and silver
Gold and silver prices rose as many investors sought to place some of their allocations in traditional safe havens (see Figure 3).
Gold surged by 68 per cent, silver skyrocketed by 137 per cent, and the US dollar weakened by 9.5 per cent against a global basket, pressured by fiscal risks and slowing growth expectations.
Figure 3: Gold outpaced equities, silver outpaced gold (per cent)
Past performance is not a reliable indicator of future results.
Source: Aviva Investors, Bloomberg. Data as of December 31, 2025.
Our outlook for 2026
We expect global growth to accelerate through 2026 as tariff headwinds fade and a potent mix of easier monetary policy, modest fiscal support, rising real incomes, and AI-driven investment lifts activity. Inflation should converge toward central bank targets, allowing rate cuts to conclude by mid-year. Some central banks may even pivot back to hikes later in 2026 as growth strengthens.
We expect global growth to accelerate through 2026 as tariff headwinds fade
However, the outlook faces several risks, which could include a sharper‑than‑expected weakening in the US labour market, a potential re‑acceleration of inflation from tariffs, commodities or sticky service prices, and the chance that AI‑driven investment underdelivers if adoption or returns disappoint. Rapid growth in private credit and heavy AI‑related debt issuance could also pressure credit markets, while renewed trade tensions or geopolitical escalation, especially around critical resources, may disrupt supply chains and weigh on global sentiment.
This backdrop is broadly supportive of risk assets. We remain bullish on equities across the US, Europe, and emerging markets, while holding a neutral duration stance on fixed income overall. We are bearish on eurozone and Japanese bonds, and constructive on UK and Australian duration. In credit, we remain underweight US investment grade, prefer EU over US high yield, and favour EM FX alongside a modest USD underweight.
