2026 Market Outlook
AI, volatility and opportunity
A mashup of major themes will shape global markets in 2026.
Big tech’s trillion-dollar bet, monetary policy shifts, geopolitical risk and Trump’s unpredictability are all likely to create one thing: extreme volatility.
And this could present tremendous opportunities for traders and investors.
In our 2026 Outlook, we’re going to shine a light on three key instruments and analyse their prospects for the year ahead. We’ll also cast a glance at seven other instruments so you can position your portfolio effectively.
Key Takeaways
- Volatility and opportunity: Big tech investments, monetary policy shifts, geopolitical risks, and trade tensions are all expected to drive significant market volatility.
- More growth for the S&P 500?: AI-driven earnings, a soft-landing macroeconomic environment, and strong corporate balance sheets will compete against risk from delayed tariff impacts and AI underperformance.
- USDJPY one to watch: Policy divergence between the Bank of Japan (BoJ) and the Federal Reserve could lead to a stronger yen, with BoJ rate hikes and Fed easing cycles as key drivers.
- Gold to continue to glitter?: Gold remains a favored safe-haven asset but a less dovish Fed or improving global sentiment could limit the upside.
What are the key markets in 2026?
1. US500
The US500 wrapped up 2025 over 16% higher, its third year of double-digit gains.
But can this momentum be maintained in 2026?
- AI-driven earnings resilience should support continued profit growth, with leadership broadening beyond megacap tech into small caps, industrials, and financials.
- Soft-landing macro backdrop, slowing but positive growth, easing inflation, and shallow Fed cuts will keep risk assets supported without stressing valuations.
- Healthy corporate balance sheets and strong capex cycles (AI, infrastructure) reinforce stable equity demand.
Other potential drivers:
Trump-aligned Fed head
US President Donald Trump has stated that he wants a Fed chair who will support substantially lower interest rates.
Keven Hasset, a widely considered dove, is seen as the frontrunner to be the next US Fed chair. To be clear, Trump’s pick is not enough to threaten the Fed’s independence, but the idea of a dovish chair may fuel bets around more cuts in 2026.
US midterm elections
Looking at past data, US equities have risen regardless of the election results, although there may be some volatility in the aftermath of the vote.
This could be due to the fog of political uncertainty lifting after the outcome, allowing traders to focus on fundamentals.
Key risks to monitor:
Delayed tariff pain
Economic growth was surprisingly resilient in 2025 despite Trump’s trade war.
But as businesses start passing the extra costs of tariffs onto their consumers and profits drop, this could hit economic growth.
AI fails to deliver
The AI hype could turn into panic if the massive spending fails to justify the lofty profit expectations, especially if tech companies struggle to monetise AI.
US500 (S&P 500 Index) - 12 month outlook
Value | % vs Current | ||
|---|---|---|---|
Lower case | 7,529 | +9.1% | |
Central range | 7,800 to 8,050 | +13.0% to 16.6% | |
Higher case | 8,321 | +20.6% |
2. USD/JPY
Last year, the yen was the worst-performing G10 currency against the USD.
But things may flip in 2026 due to the monetary policy divergence between the BoJ and Fed.
- Japan’s changing interest-rate environment, supported by firm domestic inflation and economic activity, plays a notable role in the currency pair.
- Corporate reforms and stronger profitability trends in Japan continue to draw attention from global investors.
- Movements in the US dollar, especially during periods of policy easing, can influence overall direction.
Key potential drivers:
BoJ rate hike on the cards
Japan’s central bank is set to tighten modestly in 2026 thanks to strengthening growth and inflation. The BoJ is projected to hike rates at least twice, which may strengthen the yen.
Fed on easing cycle
On the other side of the Atlantic, the Fed is expected to slash rates at least two times in the new year to support economic growth amid trade-related and political risk.
Risk aversion
Renewed trade fears and geopolitics could spark risk aversion across the board, sending investors towards the yen’s safe embrace.
Key risks to monitor:
BoJ obstructed by fiscal doves
Japan’s newly elected Prime Minister, Sanae Takaichi, is expected to pursue dovish fiscal and monetary policies. If this impacts the BoJ’s ability to hike rates, the yen could weaken.
Carry trade fears
The BoJ may be forced to adopt a cautious stance on rate hikes amid fears of carry trade unwind resulting in market turbulence and falling global stocks.
USD/JPY - 12 month outlook
Value | % vs Current | ||
|---|---|---|---|
Lower case | 139.18 | -10.6% | |
Central range | 145.00 to 148.00 | -6.8% to -4.9% | |
Higher case | 153.83 | -1.2% |
3. Gold
Gold glittered throughout 2025, gaining almost 65% year-to-date.
- Gold often reacts to periods of global uncertainty, where geopolitical tension and large government spending can influence how investors view safe-haven assets.
- It’s sensitive to changes in interest rates and inflation trends, since easing cycles or cooling price pressures can affect the appeal of precious metals.
- Commonly used as a portfolio diversifier, with many investors watching gold during volatile or transition-heavy market environments.
The precious metal only had one negative month as bulls drew strength from central bank buying, ETF inflows, geopolitics and Fed cut bets.
Gold could still reach new heights this year. Here‘s why:
Key potential drivers:
Fed cuts & dollar weakness
Fundamentals remain broadly in favour of higher gold prices as the Fed cut rates in the face of slowing growth, with a weaker dollar offering further support.
Central bank buying
Global gold demand hit an all-time high in the third quarter of 2025, with central banks remaining a key pillar of the purchases. As central banks hedge against risk and diversity, the bullion buying spree could roll over into the new year.
Geopolitical risk
Ongoing Russia-Ukraine conflict, persistent tensions in the Middle East and South China Sea may spark bursts of risk aversion. Although trade tensions have moderated, political fragmentation may weigh on investor confidence.
Key risks to monitor:
Less dovish Fed in 2026
Gold may fail to push higher if a less dovish than expected Fed lends support to the dollar.
Improving global mood
Easing geopolitical tensions, improving global trade relations and a risk-on sentiment powered by the AI hype may hit appetite for gold.
XAU/USD - 12 month outlook
Value | % vs Current | ||
|---|---|---|---|
Lower case | $4,085/oz | -4.8% | |
Central range | $4,200 to 4,400/oz | -2.1% to +2.6% | |
Higher case | $4,515/oz | +5.3% |
Other assets to watch this year
1. USDInd (US Dollar Index)
- Modest USD weakening expected as the Fed leads global easing, narrowing rate differentials versus major peers.
- Improving growth outside the US, notably in Europe, Japan and EM Asia reduces safe-haven demand and shifts flows toward international equities.
- Easing inflation volatility and reduced policy uncertainty diminish defensive dollar positioning, keeping the trend biased lower.
USDInd (US Dollar Index) - 12 month outlook
Value | % vs Current | ||
|---|---|---|---|
Lower case | 91.0 | -7.5% | |
Central range | 94.5 to 97.0 | -3.9% to -1.4% | |
Higher case | 100.5 | +2.2% |
2. BRN (Brent Oil)
- Supply conditions and geopolitical events both play a role, with ample spare capacity tempering some of the upward pressures created by global tensions.
- Oil demand is linked to the broader economic environment, where steady but not rapid growth shapes expectations for consumption.
- Long-term energy transitions and infrastructure investment continue to shape the industry and contribute to a mixed but active backdrop.
Brent Oil - 12 month outlook
Value | % vs Current | ||
|---|---|---|---|
Lower case | $59.4/bbl | -3.6% | |
Central range | $61.0 to 64.0/bbl | -1.0% to +3.9% | |
Higher case | $65.6/bbl | +6.5% |
3. EUR/USD
- Europe’s fiscal flexibility and structural reforms, including defence spending and energy competitiveness, contribute to how the currency pair evolves.
- Rate differences between regions can shift, as global central banks adjust to moderating inflation.
- Interest in non-US markets and changes in capital flows can influence the balance between the euro and the dollar.
EUR/USD - 12 month outlook
Value | % vs Current | ||
|---|---|---|---|
Lower case | 1.1353 | -3.3% | |
Central range | 1.1800 to 1.2100 | +0.5% to +3.1% | |
Higher case | 1.2548 | +6.9% |
4. GBP/USD
- Shifts in UK inflation and labour market dynamics continue to influence expectations for Bank of England policy.
- Monetary policy, growth prospects and fiscal positioning collectively shape the currency backdrop.
- Movements in the US dollar remain a key driver for GBP/USD, especially as global economic conditions evolve.
GBP/USD - 12 month outlook
Value | % vs Current | ||
|---|---|---|---|
Lower case | 1.2873 | -3.8% | |
Central range | 1.3400 to 1.3700 | +0.1% to +2.4% | |
Higher case | 1.4228 | +6.3% |
5. JP225 (Nikkei) Index
- Corporate reforms and productivity efforts in Japan are often highlighted as influences on earnings trends.
- A changing policy mix, with adjustments in interest rates and fiscal support, shapes the broader market environment.
- Global investment themes, such as AI-related spending and industrial activity, can be important for Japan’s equity landscape.
JP225 Index - 12 month outlook
Value | % vs Current | ||
|---|---|---|---|
Lower case | 52,250 | +2.8% | |
Central range | 54,000 to 56,000 | +6.2% to +10.2% | |
Higher case | 57,750 | +13.6% |
6. CHINAH Index (Han Seng)
- Valuation levels and signs of recovery in parts of Asia can draw attention to the region’s equity markets.
- Domestic policy initiatives in China aimed at stabilising key sectors contribute to the overall backdrop.
- Global capital flows, especially during periods of dollar movement or shifting risk appetite, can affect sentiment.
CHINAH Index - 12 month outlook
Value | % vs Current | ||
|---|---|---|---|
Lower case | 10,783 | +18.9% | |
Central range | 11,200 to 11,500 | +23.5 to +26.8% | |
Higher case | 11,918 | +31.4% |
7. UK100 (FTSE)
- Infrastructure and reindustrialisation efforts in Europe and the UK add context to how large UK companies operate.
- The index’s mix of sectors, including energy, commodities and dividend-oriented companies, shapes its characteristics.
- Interest in international markets, along with changes in the dollar, often influences how global investors view UK equities.
UK100 Index (FTSE 100) - 12 month outlook
Value | % vs Current | ||
|---|---|---|---|
Lower case | 10,355 | +6.7% | |
Central range | 10,700 to 11,100 | +10.3% to +14.4% | |
Higher case | 11,445 | +18.0% |
Final thoughts
The year ahead is set to be another defined by extreme volatility.
A rich cocktail of themes ranging from big tech’s big bet, geopolitics and ongoing trade tensions could leave markets alive with activity.
And this can only mean one thing: plenty of trading opportunities regardless of the direction.
Major indices, commodities, metals and FX pairs could be in for a wild ride.
While the projections in this document reflect a central scenario of moderating inflation and gradual monetary easing, it is important to consider the primary risk to this outlook.
Should inflationary pressures prove more persistent than anticipated, whether due to structural wage dynamics, fiscal factors, or supply chain constraints, central banks may be compelled to maintain interest rates for longer than currently projected.
In such an environment, the anticipated conditions for equity valuation expansion and US dollar depreciation could be challenged.
All market performance figures referenced are based on information believed to be reliable and, unless specified otherwise, reflect data available year-to-date as of 9th January 2026; however, accuracy or completeness cannot be guaranteed. Market conditions may change rapidly, and past performance is not indicative of future results.