Executive Summary
Global GDP growth remains strong... for now. It is expected to reach +2.9% in 2026 and +2.8% in 2027, following a robust +3% in 2025. Carryover growth from a strong 2025 in the US and China, as well as sustained momentum in the face of disruptions, account for over two-thirds of the upward revision compared to last quarter.
The US economy is increasingly running on two speeds. The impact of the trade war has been milder, at just -0.6pp in 2025 vs -1.6pp estimated in Q2. This improvement is due to reduced tariffs (to 11% effective from 27% announced on 2 April) through sector exclusions and strategic trade deals with key partners. Additionally, the information and communication sector, including AI, has fueled more than half of US GDP growth in 2025, contributing a substantial +1.1pp, and this trend is expected to continue in 2026. We have revised on the upside our forecast for 2026 to +2.5% on the back of a more resilient consumer, a higher credit impulse and the positive impact of AI.
China’s export growth remains the front-runner – despite the trade war! Growth has exceeded expectations, buoyed by stronger-than-anticipated external demand (and soft imports). This surge was driven by frontloading from the US in the first half of the year, strategic rerouting to circumvent tariffs, expanding market shares in the rest of the world, a weaker currency and competitive prices. Meanwhile, domestic demand still struggles to recover sustainably, with further policy support needed and likely to be announced by Q1 2026. In this context, and with many sectors in overcapacity, price pressures remain low.
The Eurozone outlook remains par for the course, with moderate growth ahead amid structural challenges. GDP growth is expected at +1.1% in 2026 after +1.4% in 2025. Excluding volatile national accounts in Ireland, the Eurozone economy will accelerate from +0.9% in 2025 to +1.2% in 2026 and +1.3% in 2027. Germany’s economy should reach +0.9% growth in 2026 – a strong rebound after three consecutive years of stagnation or recession but still underwhelming given the available fiscal stimulus as structural headwinds persist. France’s GDP will grow by +1.1% despite the ongoing political challenges, benefiting from a renewed investment cycle.
Global trade surprised on the upside as companies stepped up to the plate with rerouting and mitigation strategies. Half of the improvement in our forecast for trade growth (from +2% to +3.5% in 2025 and from +0.6% to +1.3% in 2026) has been driven by lower tariffs, firms’ rerouting and mitigation strategies, as well as a surge in AI-related investments. Overall, the trade war pushed volume of containers back to 2017 highs, mainly driven by Asia.
Emerging markets are not just watching from the sidelines: They remain resilient overall, still enjoying a more positive cycle than developed markets and generally solid external positions. Support from a lower USD and the Fed easing cycle had allowed many EM central banks to cut rates more than expected in 2025. But some countries may face slowing momentum going forward (e.g. India, Indonesia, Romania, Russia or Taiwan), while current account deficits have been widening for some (Argentina, Chile, Colombia, Indonesia, Philippines, Romania, Türkiye) and surpluses have turned into deficits for others (Saudi Arabia, Czech Republic, Poland), requiring close monitoring.
Monetary and fiscal policy are still supportive but less so. We strongly believe the Fed will end its easing cycle sooner than markets expect, with the Federal Funds rate to settle at 3.5% after one more 25bps cut in Q1. Sticky core inflation and accelerating growth will prevent rates from going too far below the Taylor rule. In contrast, the ECB is poised to hold rates at 2.0%, with risks titled to the downside. On fiscal policy, the US benefits from a tangible growth impulse supported by the One Big Beautiful Bill’s loosening of financial conditions whereas Europe’s lingering fiscal concerns are visible in France’s struggle to cut spending (leaving deficits near –5.1% of GDP) and contribute to higher long-term yields. Germany’s fiscal deficit is set to reach -4.0% of GDP in 2026 after -3.1% of GDP in 2025, the highest in more than a decade outside the pandemic.
Corporates are going the distance in 2026 with strong momentum. US earnings rose +15% in Q3 2025, and global AI capex is set to reach USD571bn. Europe has rebounded, led by tech and pharma, while auto lags. Balance sheets are solid, though refinancing will be costlier. As many corporates have deleveraged, they have room to increase borrowing to fund necessary capex. Insolvencies are expected to increase by +3% in 2026, especially in the US and Europe. Despite robust fundamentals, geopolitical fragmentation and default risks still cloud the outlook.
Despite being in the late cycle, capital markets are still going for gold. A volatile year draws to a close, but global equities posted a third year of robust gains. Rates remained broadly stable, given the heavy news-flow, while dollar the weakness come to a halt in the second half of 2025. Beneath the surface, however, caution prevails: Defense stocks and gold emerged as 2025’s standout performers - not AI. Looking ahead, we expect rates and currencies to trade largely sideways and equity returns to slow but not falter as the AI boom continues at a slower pace. We see a critical juncture for private markets in 2026: Rising energy and grid investment, the ongoing AI boom and shifting real-estate values are clarifying where long-term value is returning, even as weaker assets show stress in a more mainstream market. In this environment of structural demand and selective pressure, disciplined investors focusing on resilient cash flows and early positioning across private markets are best placed to capture durable, risk-adjusted returns.
The following downside risks need to be considered: institutional, geopolitical and financial. Firstly, institutional risks, including central bank independence, protectionism and election outcomes, increase the likelihood of negative policy shifts. Secondly, geopolitical risks and national security priorities will continue to cause volatility. Finally, financial risks, such as the possibility of an AI-equity correction, renewed de-dollarization pressures, turbulence in private credit markets and concerns over the sustainability of public debt, will continue to increase throughout 2026, pushing the limits of a benign late financial cycle.