Geopolitics, U.S. midterm elections and diverging monetary policies are among key drivers for world markets in 2026, alongside an artificial intelligence boom that has raised concerns about a tech share bubble.<\/p>\n
\u201cThe true black swan, then, could lie elsewhere,\u201d said Swissquote Bank senior analyst Ipek Ozkardeskaya, referring to a rare, high-impact event that jolts markets.<\/p>\n
\u201cIt may emerge from \u200dan overlooked corner \u200bof the market: an unexpected macro shock or a sudden policy shift.\u201d<\/p>\n
Here\u2019s how some key market themes are taking shape for 2026.<\/p>\n
PLENTY OF RISKS LINING UP<\/p>\n
The nomination of a new Federal Reserve chair in early January is a key event. Incumbent Jerome Powell\u2019s term expires in May.<\/p>\n
U.S. President Donald Trump has pressured the Fed to cut rates, bringing central bank independence into question.<\/p>\n
\u201cThe most under-appreciated tail risk for 2026 is that the Fed eases monetary policy more than economic conditions justify, inadvertently reigniting inflation,\u201d said eToro global market strategist Lale Akoner.<\/p>\n
He said further rate \u2060cuts could lead to aggressive easing, pushing up inflation and forcing a disruptive policy reversal.<\/p>\n
The U.S. Supreme Court is poised to rule on the legality of Trump\u2019s sweeping emergency tariffs, while U.S. midterm elections take place in November.<\/p>\n
Geopolitics is also taking center stage after the U.S. captured Venezuelan President Nicolas Maduro.<\/p>\n
Trump warned of possible military action in Colombia and Mexico and said Cuba\u2019s communist regime \u201clooks ready to fall.\u201d Canada and Greenland, targets of Trump rhetoric, are likely watching how developments in Venezuela unfold.<\/p>\n
It\u2019s a big year for emerging market elections from Hungary to Brazil and \u200cColombia, a potential headwind after a strong 2025.<\/p>\n
Hungary\u2019s Viktor \u200dOrban faces a race against time before April\u2019s election to turn the stagnating economy around enough to extend his grip on power.<\/p>\n
Latin American elections will fall \u200dunder the shadow of events in Venezuela, but wins by conservatives in Brazil and Colombia could \u200cbring the tighter budget policies and streamlined regulations that investors want.<\/p>\n
CHECKING IN ON STOCKS<\/p>\n
Stock markets in the U.S., Japan and Europe should rally \u2060this year, but will struggle to match 2025\u2019s blistering gains, a recent Reuters poll suggests. It showed 56 per cent of those surveyed forecasting a correction in the coming months.<\/p>\n
A potential sell-off in AI-related shares could \u200balso hurt broader sentiment. AI excitement has boosted valuations, feeding expectations for massive spending on infrastructure.<\/p>\n
But doubts about the returns from AI investments and levels of debt some firms are taking on are starting to creep in.<\/p>\n
Analysts see the S&P 500 at 7,490 points by end-2026 and Europe\u2019s STOXX 600 at 623, implying gains of just over 9 per cent and 5 per cent respectively from end-2025.<\/p>\n
eToro\u2019s Akoner said he expected markets to be less concentrated in U.S. mega caps as rotation continues.<\/p>\n
CENTRAL BANKS WALK A TIGHTROPE<\/p>\n
Central banks start 2026 on differing paths, having broadly been \u200bon an easing trend.<\/p>\n
The Fed cut rates three times last year and markets forecast two more 25-basis-point reductions by year-end. The European Central Bank is seen on hold, while traders price in a rate hike in Australia and Japan is expected to lift rates to 1 per cent this year.<\/p>\n
\u201cThe ECB has a single mandate \u2013 inflation. Therefore, it will continue to prioritize price stability. The Fed, however, has a dual mandate and political pressure for easier policy, giving it more flexibility – but inflation above 3.5% would be a clear barrier,\u201d said Swissquote Bank\u2019s Ozkardeskaya.<\/p>\n
STICKY DEBT<\/p>\n
While Trump hopes rate cuts will lower mortgage rates, longer-term borrowing indicators, such as 30-year Treasury yields, more sensitive to long-term government finances, ended 2025 little changed.<\/p>\n
Bond yields and debt levels across major \u2060economies are expected to remain elevated given fiscal stimulus.<\/p>\n
Analysts polled by Reuters forecast 10-year Treasury yields to rise to 4.25 per cent by end-2026 from around 4.17 per cent. German Bund yields are \u2060forecast to rise to 2.97 per cent from 2.89 per cent.<\/p>\n
British and Japanese yields, by contrast, are expected to fall.<\/p>\n
FORECASTING CURRENCIES<\/p>\n
The consensus trade for a weaker dollar this year contrasts with a year ago, when stronger dollar expectations faded following the \u200cApril 2 tariff turmoil.<\/p>\n
The dollar index, which just had its worst year since 2017, is forecast in a Reuters poll to weaken to 95.7 by year-end, implying a 2.5-per-cent fall from current levels.<\/p>\n
\u201cThe dollar\u2019s dominance is intact, but no longer unquestioned,\u201d said Akoner.<\/p>\n
The yen is expected to strengthen, leaving the dollar at 145 yen from around 157 over that period, according to a Reuters poll. Sterling and the euro are seen broadly stable.<\/p>\n
Cryptocurrencies remain a high-risk segment and a strong correlation with tech shares should keep volatility elevated, said Ozkardeskaya.<\/p>\n
Bitcoin hit a record high above US$125,000 in October before sliding. It ended 2025 down \u200cover 6 per cent.<\/p>\n
Institutional adoption, exchange-traded funds, and integration with energy and AI markets could bolster long-term demand, added Akoner.<\/p>\n","protected":false},"excerpt":{"rendered":"Geopolitics, U.S. midterm elections and diverging monetary policies are among key drivers for world markets in 2026, alongside…\n","protected":false},"author":2,"featured_media":392209,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[901,888,902,879,877,903,45,49,48,876,895,896,891,878,875,46,549,295,894,887,914,880,881,893,889,890,884,904,885,909,910,912,907,911,905,908,882,898,899,714,897,906,865,61,900,892,886,883,913],"class_list":["post-392208","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-alberta","tag-arts-news","tag-bc","tag-breaking-news","tag-breaking-news-video","tag-british-columbia","tag-business","tag-ca","tag-canada","tag-canada-news","tag-canada-sports","tag-canada-sports-news","tag-canada-trafficcanada-weather","tag-canadian-breaking-news","tag-canadian-news","tag-economy","tag-education","tag-environment","tag-federal-government","tag-foreign-news","tag-globe-and-mail","tag-globe-and-mail-breaking-news","tag-globe-and-mail-canada-news","tag-government","tag-life-news","tag-lifestyle","tag-local-news","tag-manitoba","tag-national-news","tag-new-brunswick","tag-newfoundland-and-labrador","tag-northwest-territories","tag-nova-scotia","tag-nunavut","tag-ontario","tag-pei","tag-photos","tag-political-news","tag-political-opinion","tag-politics","tag-politics-news","tag-quebec","tag-sports-news","tag-technology","tag-travel","tag-trudeau","tag-us-news","tag-world-news","tag-yukon"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/392208","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=392208"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/392208\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/392209"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=392208"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=392208"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=392208"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}