The narrative for 2026 is defined by what J.P. Morgan calls "multidimensional polarisation." While the global economy remains resilient, it is being reshaped by uneven monetary policy, the relentless expansion of AI, and widening divides between sectors and regions.

The risk of a global recession has faded according to analysts, but we’re not so sure. Growth is projected to be unevenly distributed with Goldman Sachs forecasts 2.8%, beating consensus. Moody’s sees a "steady but subdued" 2.5%.

🇺🇸 The United States: Resilient & Normalising:

The US remains the global engine, though banks disagree on the speed of the car. Goldman Sachs is bullish (2.6% growth) citing tax cuts and easing financial conditions. J.P. Morgan and Moody’s are more cautious (1.8%–2.0%), seeing a cooling labor market. Here’s what we’re keeping an eye out for:

1. Will AI continue to be macroeconomic driver? J.P. Morgan notes that the "AI-driven supercycle is fueling record capex," spreading from tech into utilities and logistics. AI-related capital outlays are expected to rise another 33% in 2026 following a massive surge in 2025.

2. While GDP looks good, the job market is cooling. Moody’s describes a market characterised by "stagnant hiring and slow job growth". J.P. Morgan warns that weak labor demand is eroding purchasing power, assigning a 35% probability to a recession in 2026.

3. Inflation remains sticky, hovering in the upper-2% range due to tariff pass-throughs and stabilized wage growth. Consequently, the Federal Reserve is expected to continue its easing cycle, with markets eyeing a target rate cut to around 3–3.25%.

🇪🇺 The Eurozone: A Modest Rebound:

Europe is set for a cautious recovery, with growth acceleration projects at 1.3%–1.4% as falling inflation boosts consumer wallets. Here’s what we’re keeping an eye out for this year:

1. A major shift in 2026 is the impact of government spending. Germany is expected to benefit from sharp increases in federal spending on infrastructure and military defense, via the "ReArm Europe" initiative.

2. The export sector remains the weak link. New U.S. tariffs on steel and autos are disrupting supply chains, and European exporters face intense competition from China.

3. With inflation largely normalizing, the European Central Bank (ECB) is expected to have concluded most of its easing, holding rates steady or cutting slightly to support investment.

🇨🇳China: Manufacturing Power vs. Domestic Drag

China is a tale of two economies: massive manufacturing strength weighed down by internal weakness. Growth is expected to moderate to 4.5%–4.8%. Here’s what we’re keeping an eye out for this year:

1. Manufacturing prowess and control over critical supply chains (like rare earths) provide major economic leverage.

2. The government is pushing to consolidate non-strategic sectors plagued by overcapacity (like solar panels and cement). This structural reform is intended to rebalance the economy, even if it moderates headline growth.

3. Real estate remains the primary weight on the economy. Construction and property starts are down significantly, a drag estimated to subtract around 1.5 percentage points from growth in 2026.

🌏 Rest of the World: Shifting Chains & Rising Stars
Emerging Markets (EMs) are poised to outpace advanced economies, with Moody's projecting 4.0% growth for the G-20 EMs. Here’s what we’re keeping an eye out for this year:

1. In a major divergence from the rest of the world, the Bank of Japan is expected to hike rates in 2026 as wage growth takes hold, moving against the global easing trend.

2. India remains a standout growth story, with Deloitte forecasting growth between 7.5% and 7.8% for fiscal year 2025-26, driven by strong private consumption and rural demand.

📈 Asset Implications: What to Watch

The macro backdrop favors cyclical assets but demands hedges.

S&P 500: Cyclical Upside
Goldman Sachs targets 7,600 (approx. 10% upside). J.P. Morgan forecasts double-digit gains. Strong earnings and the AI investment boom outweigh concerns over high valuations.

Gold: The Strategic Hedge
Bullish consensus. J.P. Morgan sees $5,000/oz. Goldman Sachs targets $4,900/oz. Relentless central bank buying and safe-haven demand against geopolitical friction.

Bitcoin: The Wild Card
The environment of increased liquidity (Fed cuts) generally supports high-beta assets. Institutional adoption remains the key narrative to watch in 2026, though specific bank price targets were not included in the primary research files provided.