Global growth drivers in 2026 and beyond centre on innovation and strong institutions as key to sustainable growth, while optimism masks fragility as productivity gains remain elusive and correction risks rise.
Post‑pandemic exceptionalism in the US is fading with immigration constraints and sustainability questions surrounding the AI investment boom calling for selective focus on productivity‑driven firms.
In Japan, inflation and governance reforms signal progress while domestic reinvestment in digitisation, decarbonisation and fusion is critical amid diplomatic and inflation risks. High global debt and accelerating issuance heighten bond duration risk; investors should diversify and maintain buffers against shocks.
At the same time, persistent currency and current account imbalances, RMB undervaluation and potential currency flexibility could trigger reserve shifts away from USD and ease yen pressure. In Asia, China’s renewable surplus may become a strategic asset in the AI race; energy efficiency could overtake transistor density as the key constraint.
In Europe, private‑sector fusion breakthroughs are expected to shorten commercialisation timelines, while institutional innovation and shared debt instruments could strengthen fiscal integration.
Global multi-asset
As the Fed may not cut interest rates as aggressively as the markets expect, we take a more cautious view on risk assets into 2026. Valuations remain historically high, raising long‑term return concerns despite strong near‑term growth signals.
We are wary of long‑dated government bonds due to resurgent inflation and are therefore focused on sovereigns with steep yield curves, while recognising that positive bond‑equity correlation may amplify volatility, making mid‑curve bonds and US dollar exposure key diversifiers. The US dollar is expected to stand out as a diversifier, benefiting from positive carry and negative correlation to risk assets.
Global equity
AI infrastructure spending surged in 2025, with hyperscaler capex projected to reach USD 600 billion by 2026 and driving gains across tech, industrials and utilities. Market leadership narrowed sharply as speculative growth names soared while quality stocks suffered their steepest underperformance in two decades.
With valuations for quality on discount, history suggests a rebound is likely—creating compelling opportunities for long‑term investors. Potential catalysts such as fatigue in the AI theme, geopolitical flare‑ups, trade disruptions, credit stress and labour market weakness come into play.
Finding winners insulated from these macro trends is critical for generating idiosyncratic alpha, and if real rates rise, immediate profits will matter more than distant promises.
Global fixed income
Global growth is expected to slow in 2026, but with conditions varying widely across different regions, and divergent central bank policies creating opportunities in rates and FX. The Fed Funds terminal rate is likely to be around 3% by mid‑year, supporting US asset attractiveness, while sustainable bonds could prove a useful hedge if the AI theme starts to overheat significantly and AI‑related funding leads to deratings.
Should hyperscalers fail to deliver on their investment plans, they could face pressure on profitability, cash flow and, in more severe cases, the risk of being downgraded to high yield. For the credit market, the big question is whether 2025’s strong performance can be repeated in 2026.
A weaker dollar, combined with an environment where global growth trundles on without a major downturn, should be broadly supportive for emerging markets, and New Zealand stands out as a developed market worth watching in 2026.
Asian equities
We have a positive view of Asian equities as we head into 2026 as the region’s fundamental backdrop has improved on a confluence of macroeconomic, policy and market-specific factors. The Federal Reserve (Fed)’s pivot towards monetary easing and US fiscal expansion has set the stage for renewed capital flows into Asia.
China is showing stabilisation while Indian growth is showing signs of recovery. Reforms across Asia are also gathering momentum, notably in South Korea and Singapore.
Four key themes are expected to drive opportunity in 2026: Chinese artificial intelligence (AI), Chinese healthcare, India’s consumption revival and the Equity Market Development Programme (EQDP) in Singapore.
Asia offers a compelling mix of stability and transformation, creating a strong case for long-term allocation.
Asian fixed income
Asia is set to enter 2026 with improving trade, contained inflation and strong fundamentals, with potential upside to growth expectations amid eased external pressures. Regional central banks are seen managing interest rate cuts cautiously, with fiscal policy taking the lead in supporting growth.
In China, the 15th Five-Year Plan (FYP) advances a continued shift toward stronger consumption and greater technological self-reliance. Together with the ‘anti-involution’ campaign, these efforts are expected to support more durable growth and counter disinflation or deflation, while deeper regional integration continues to expand the Chinese yuan’s role in trade, investment and settlement.
In India, Indonesia and the Philippines: attractive real yields, anchored inflation and a commitment to fiscal consolidation are set to support demand for government bonds.
In Singapore, moderating growth and stable inflation to prompt further easing by the Monetary Authority of Singapore (MAS); yields on Singapore Government Securities (SGS) to broadly track those of USTs, with demand staying firm despite a modest rise in issuance.
Asian credit markets are cautiously constructive as resilient fundamentals and robust technicals support tight valuations. Returns to be primarily carry driven. Selective approach is essential given potential US policy expectation shifts and localised sector and political risks.
By The Amova Asset Management Investment Team
