AI, Uncertainty & USD Weakness Dominate Financial Outlooks for 2026

As the end of 2025 approaches, financial institutions have begun publishing their respective outlooks for 2026. Chronicle.lu takes a look at how the financial landscape could evolve in 2026 through the reported opinions of asset managers State Street Investment Management and Indosuez Wealth Management, and private banks Quintet and Lombard Odier, all of whom have offices established in Luxembourg.

Across the four review reports, 2026 is framed as a year of modest but resilient global growth, with recession fears repeatedly avoided thanks to supportive monetary and fiscal policies. Despite ongoing geopolitical friction, supply-chain reorientation and tariff uncertainty, economic momentum remains underpinned by steady consumption trends, stabilising labour markets and targeted government spending across major regions.

In its report, State Street Investment Management said 2026 is framed as “the year of delayed policy impact”, where the full effects of 2025 to 2026 policy shifts, such as US fiscal programmes, German spending initiatives and Asian AI investments, begin to materialise gradually. They noted that equity markets are positioned for continued gains, driven primarily by AI-related investment and earnings expansion, with the US remaining the epicentre of AI capital expenditure. Emerging markets will likely benefit from weakness in the US dollar, supportive liquidity conditions and widespread AI adoption, while China’s growth hinges on the areas of infrastructure and innovation.

State Street highlighted that the fixed income outlook favours sovereign debt over corporate credit, given tight spreads and uncertain fiscal trajectories, and noted that US Treasuries in the five to ten-year range are preferred, with moderate return expectations, while European and Asian government bonds offer selective opportunities amid divergent policy paths and rising debt sustainability concerns. They also noted that alternative investments will play an increasingly important strategic role, with private credit, infrastructure, digital assets (especially data centres) and gold highlighted as essential tools for income, diversification and participation in new growth areas. Gold in particular remains a key hedge as geopolitical tensions, fiscal risks and demand from central banks continue to support prices.

In its report, Indosuez Wealth Management presents 2026 as a year of strategic recalibration and emphasised the importance of beginning the investment year with a well-articulated vision. They reflected on their 5 core messages for 2025 (ongoing monetary easing, US exceptionalism, AI and electrification as structural growth engines, ASEAN’s rise and the relevance of multi-asset portfolios) and noted that each played out materially as expected. They said this reinforced their argument that disciplined, forward-looking strategy is critical to navigating market volatility and extracting performance from structural shifts.

They highlighted that the resurgence of capital expenditure, driven by AI automation, electrification and defence and energy infrastructure, strengthened the outlook for small and mid-cap firms, real assets and infrastructure themes. The report also underscored the relevance of companies enabling AI adoption or benefiting from heightened defence spending. The theme of a weaker US dollar was also present here, along with improved credit conditions globally serving as a strong tailwind for emerging markets, particularly in Asia, where they highlighted an ongoing economic rebalancing creating new investment pathways.

Quintet Private Bank’s report presented a constructive view of global growth in 2026 and also noted that recession fears in 2025 had proved unfounded, primarely thanks to rate cuts and fiscal support. They foresee trade uncertainty easing, monetary policy loosening and investment accelerating across major economies and expect moderate yet sustained global expansion in 2026. Policy divergence was highlighted, with the US midterm elections taking place in late 2026, Europe investing heavily in defence and infrastructure, the UK pursuing austerity, Japan deploying a large fiscal package and China continuing its state-backed support.

Their report emphasised a shift toward a more multipolar economic environment, driven by ageing populations, rising sovereign debt and geopolitical realignment. They believe these forces imply higher long-term funding costs, greater dispersion in asset returns and less predictable market cycles. Again, it was noted that the US dollar is expected to gradually weaken with gold remaining an important diversifier. AI is also highlighted as a major structural theme, with valuations justified by strong cash-flow-backed innovation rather than speculative excess. Quintet’s overarching message was one of resilience based on diversification across asset classes to absorb shocks while capturing emerging growth opportunities.

In its report, Lombard Odier said the 2026 macro environment is defined by modest but resilient global growth, with recession risks still contained despite multiple headwinds. Trade and policy uncertainty remains high, driven largely by elevated US tariffs and geopolitical frictions, though monetary and fiscal policies continue to provide a stabilising backdrop. 

They highlighted that emerging markets retain a growth premium over developed economies, while China maintains stability through measured policy support and, overall, global conditions are “unspectacular but steady” with supportive policy settings helping offset tariff-related drag.

Overall, the common themes featured across the outlooks are a continuing weakening of the US dollar, gold acting as a defensive anchor and continued investment in AI and digital infrastructure being prominent, with uncertainties expected to arise in relation to supply-chain vulnerabilities and energy disruptions, geopolitical uncertainty and ongoing tariff uncertainty.