EFG expects the United States to be the fastest-growing advanced economy in 2026. Three structural factors drive this: Economic resilience, a clear growth plan and IT leadership. In addition, three cyclical factors should further contribute to growth: a lower rate environment, lower energy prices and fiscal stimulus. The United States’ clear growth plan is known as “3-3-3,” targeting 3% real GDP growth, a 3% budget deficit-to-GDP, and a 3 million barrels per day increase in oil production; while ambitious, EFG notes the presence of a clear plan which contrasts with many peers.
Across rates, EFG anticipates policy rates in major advanced economies will trough in the first half of 2026 and remain close to neutral thereafter, limiting the scope for further cuts. By contrast, elevated real rates and yields in select emerging economies provide potential opportunities, with Brazil’s local markets standing out on real yield differentials and Mexico poised to benefit from improving US growth and a supported peso amid policy-rate alignment with the Federal Reserve.
In bond markets, EFG highlights fiscal sustainability as a central theme. In the US, debt stabilization could be achievable if the “3-3-3” plan gains traction, helping calm market concerns. In Europe, France and the UK are likely to face heavier scrutiny, with memories of the UK’s 2022 “Liz Truss moment” still weighing on Gilt market perceptions.
A multipolar geopolitical landscape
Geopolitics will continue to dominate 2026 from fierce US-China rivalry. Washington’s push to ‘de-risk’ from Chinese supply chains will continue, particularly with respect to semiconductors and rare earths, although the reality is that the US, China and other economies in Asia are deeply interdependent. In view of the ongoing Russia-Ukraine war, Europe is undergoing its largest rearmament in decades, paving the way for further defence spending in 2026, with all NATO members targeting a defence spending goal of 5% of GDP by 2035. BRICS expansion and divergent trust in political leadership across regions underscores a fragile landscape, with European security risks and sanctions regimes likely to continue shaping trade and capital flows.
Artificial intelligence driving unprecedented energy demand
Technology and innovation remain central to the Outlook for 2026. EFG expects the AI investment cycle to drive unprecedented demands for data centre capacity and power, with US data centres’ share of electricity consumption projected to rise from an estimated 4.3% in 2024 to 11.7% by 2030. As free cash flow at leading AI firms is stretched, funding models are and will continue to evolve to include greater use of debt, equity raises, and vendor financing—such as large vendor commitments to major AI labs—marking a new phase of the cycle. EFG also highlights humanoid robotics progressing from trials toward practical applications across industry and services, with costs declining and early deployments broadening, particularly in economies facing aging demographics and labour constraints.
Across Europe, a number of reforms will play a supporting role in the potential revival of the bloc driven largely by external threats, particularly from Russia, and pressure from the US to increase defence spending. Besides Germany’s EUR 500 billion infrastructure package, spending on green energy and carbon reduction is expected to experience a revival. Further, Europe still plays a dominant role when it comes to innovation: 16 of the world’s 25 top-ranked innovative economies are in Europe, with Switzerland ranking as number 1 globally for 15 years in succession. Considering that investors are still looking for safe havens, these dynamics are envisaged to create a favourable setup for European and Swiss equities, particularly small and mid-caps, as eurozone credit impulse improves against a backdrop of low rates.
Resilient dynamics favour emerging markets
EFG also sees 2026 as a year for a renewed appraisal of emerging markets, citing a valuation discount versus developed markets, a stable-to-weaker dollar, improved fiscal discipline in economies like Mexico, Brazil and India, resilient domestic demand—especially in India—and commodity dynamics including China’s dominance in rare earth metals.
Private markets are expected to play an important role in portfolios in 2026, with diversified mid-cap private market portfolios, secondaries and private debt emerging as key solutions to balance growth opportunities with the need for flexibility and resilience. However, diversification remains critical in private markets. By combining private equity, debt, infrastructure and real estate, investors can spread risk and achieve more consistent returns.
Finally, EFG expects US IPO activity to continue normalizing in 2026 after a recovery in 2025, led by AI, biotech, clean energy and green infrastructure, alongside a measured return of Special Purpose Acquisition Companies (SPACs). Dealmaking in 2026 will likely prioritise quality over volume, focusing on strategic alignment rather than opportunistic expansion.
Overview of EFG’s top ten convictions for 2026:
- US economy set to lead growth: Three structural factors are expected to favour the US in 2026: Economic resilience, a clear growth plan and IT leadership. In addition, three cyclical factors should further contribute to growth: a lower rate environment, lower energy prices and fiscal stimulus.
- Trough interest rates in advanced economies; opportunities in emerging markets: Compared to the main advanced economies where the scope for rate reductions is limited, real interest rates and bond yields in some emerging and developing economies remain elevated and provide opportunities.
- Bond markets: Beware of shark-infested waters: There are several markets – notably France and the UK – for which fiscal sustainability will be questioned in 2026. Pledges to bring government finances under control may pacify the ‘sharks’ for a while but when confidence evaporates, bond markets will look vulnerable once again. This may cause problems for government stability in some parts of the world.
- Geopolitics: New alliances, state capitalism and a diverging electorate: Continued rivalry between the US and China, the forging of new alliances, the growth of state capitalism, electorate dissatisfaction and bifurcation are the key geopolitical themes for 2026.
- Trump’s 3 Ds: DOGE, Deregulation and Drugs: President Trump’s reform agenda is not expected to slow down in his second year. Broad deregulation remains an important theme with a particular focus on housing and de-zoning/re-zoning land and is seen as central to achieving the objective of 3% real economic growth.
- Opportunities abound in the AI race: The AI race will be a defining theme in the second half of the 2020s. Intense competition is expected between the US and China, and huge capital investment and unprecedented technological innovation on behalf of these nations. One of the critical challenges in building capacity is securing enough energy to power servers. If the ambitious AI investment plans are to be believed, an estimated additional 80-120GW of capacity needs to be constructed in 2025-2030.
- An EU revival – restructuring and reform: The EU will take further steps aimed at restructuring and reform in 2026. This is due to external threats – particularly from Russia – and pressure from the US to increase defence spending. Europe’s strength in innovation and the collaboration between member states will continue to be a critical factor. A renewed boost for smaller European and Swiss equities is likely.
- Emerging markets have the wind in their sails: Investor attitudes towards emerging markets have waxed and waned over long periods. However, as we enter 2026, several factors support their growth prospects: valuation, a weak US dollar, favourable global demand or supply constraints for key commodities, and strong demographics.
- Private markets: Unlocking liquidity and diversification opportunities: Assets under management in private equity and private debt have experienced rapid growth in recent years and are forecast to reach approximately USD 11.9 trillion and USD 2.6 trillion, respectively. However, the industry faces a persistent challenge, which is the slow return of capital to investors. This issue is driving a shift toward strategies that prioritise liquidity opportunities, diversification and risk management such as the secondaries market and midcap buyouts.
- IPOs and M&A activity: Multiple sectors set to benefit: After a quiet period, due to rising interest rates and market volatility, we expect to see the US IPO market continue its recovery. Dealmaking in 2026 will likely prioritise quality over volume, focusing on strategic alignment rather than opportunistic expansion.
EFG’s Outlook 2026 publication can be downloaded here.
