New Delhi

Global financial markets are entering 2026 with cautious optimism, buoyed by easing inflation, selective monetary policy support, and a robust investment cycle driven by Artificial Intelligence (AI), according to the Global Strategy Year Ahead 2026 report by Abakkus.

The report noted that the world economy is emerging from the post-tightening slowdown of 2025 and moving toward a more balanced growth phase. While inflation has moderated across regions, it remains sticky enough for central banks to remain cautious. Policymakers are expected to adopt gradual support measures rather than aggressive easing, with modest rate cuts projected for the U.S., the European Central Bank largely on hold, and Japan continuing slow normalization.

Global GDP growth in 2026 is forecast at 2.7–3.4%, led by the United States and supported by fiscal stimulus, AI-driven capital expenditure, and resilient labor markets. The U.S. is expected to grow around 2–2.4%, China near 4.5% despite structural challenges, and Europe modestly at 1–1.5%, aided by fiscal expansion and green transition initiatives. Emerging markets, particularly India and parts of Asia, are expected to benefit from supply-chain diversification, favorable demographics, and accelerating digital adoption. India is projected to remain the fastest-growing major economy, with growth near 6.5%.

Artificial intelligence is identified as the dominant macro and market theme for 2026, driving a historic global investment cycle. Heavy spending by U.S. hyperscalers and Asian tech firms is boosting demand for data centers, semiconductors, cloud infrastructure, and power generation. While AI is seen as a structural productivity driver, brokerages warn of valuation risks, market concentration, and uncertain monetization, underscoring the need for diversified exposure.

Equity markets are expected to remain constructive but increasingly selective, favoring U.S. large-cap technology and quality stocks, European cyclicals, and undervalued emerging markets. Fixed income strategies tilt toward shorter-duration bonds, inflation-linked securities, securitized credit, and emerging-market debt. Private markets are gaining prominence, with opportunities in private equity buyouts, energy-transition infrastructure, and select real assets. Commodities, especially gold, are seen as key diversifiers amid geopolitical risks, persistent inflation, and rising asset correlations.

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The report also highlighted that U.S. tariffs, now at decades-high levels, are reshaping global trade flows. While near-term effects are muted, delayed impacts could push U.S. inflation higher by mid-2026. Geopolitical tensions, trade fragmentation, high sovereign debt, and uneven AI monetization are flagged as major downside risks.