From the AI bubble to Fed fears: the global economic outlook for 2026

"Investors expect global stock markets to keep rising in 2026, despite fears that the AI bubble could burst, and anxiety about chaos engulfing the US central bank. Wall Street strategists broadly expect the S&P 500 share index of US-listed companies to continue to rise over the next 12 months, but said it could be a volatile year if geopolitical tensions increase and inflation fails to fall."

"A poll of 440 investors, economists and analysts by Deutsche Bank found that 57% believe a plunge in technology valuations, or waning enthusiasm in AI, is a top risk to market stability in 2026. Investors have never before been in such agreement about the biggest market risk for a year ahead than they are now: Deutsche Bank survey. "AI/tech bubble risk towers over everything else." The next biggest risks: a loss in Fed independence and crisis in private credit."

"The second biggest fear is that Donald Trump appoints a new Federal Reserve chair who pushes for aggressive cuts to interest rates, causing market turmoil. The US president said on 17 December he would name the next Fed chair soon, and that it would be someone who believes in lower interest rates by a lot. Respondents third most significant concern was a crisis in the private capital market such as those seen in private equity, venture capital and private debt."

Investors expect global stock markets to rise through 2026 while warning of volatility if geopolitical tensions escalate or inflation stays high. Wall Street strategists foresee further S&P 500 gains over the next 12 months but caution on possible turbulence. A Deutsche Bank poll of 440 professionals found 57% view a plunge in technology valuations or fading AI enthusiasm as the top market risk. The next largest concern is loss of Federal Reserve independence if the US president appoints a chair who favors aggressive rate cuts. Stress in private capital markets and private credit also poses a significant risk. UBS warned slower AI progress, rising inflation or renewed debt trouble could trigger new challenges.

Read at www.theguardian.com