Three factors for investors to watch in 2026: AI, geopolitics and credit stress

This year started much as 2025 had ended, with stock markets continuing their strong run. Just as the New Year celebrations ended, indices in the US, UK, Europe and Japan hit fresh all-time highs.

Notably, gold’s rally spilled over into 2026 too, with the price of the so-called ‘safe haven’ asset also scaling new highs, in tandem with escalating geopolitical pressure and a renewed focus on trade tariffs. 

Despite the prevailing uncertainty, it remains our base case expectation that both monetary policy and the global economy should be supportive for markets in 2026. However, investors will have much to monitor over the coming year – especially across three areas in particular, as outlined below. 

Awaiting AI’s ‘big bang’ moment

Artificial intelligence was 2025’s dominant equity market theme, especially in the US, as large players continued to ramp up capital spending on building out their AI infrastructure. Global investment in AI is rapidly accelerating - annual investment is expected to increase to $1.5bn for AI applications and $400bn for AI infrastructure by 2030. ¹

Behind this is the belief of the biggest developers that demand for applications will rise significantly, generating revenues which will justify their spending in terms of the return on investment. But some have begun to question these assumptions and express concern about potential bottlenecks in the infrastructure’s build-out phase, notably in areas such as semiconductors, which are in significant demand.

Going forward, investors will need evidence of how AI is being used by the rest of the economy and how companies across different sectors are themselves investing in AI to improve their businesses. Furthermore, consumer applications of AI are important in this adoption phase. New product developments, companies outlining how AI is being used more extensively, and the impact on profitability and productivity are necessary flags to keep investor confidence in the technology alive. 

Geopolitics vs. markets

Global geopolitical tensions swiftly took centre stage in 2026. Recent developments in global relations are naturally a source of concern, with heightened event risk possibly leading to bouts of market volatility across equity, bond, and foreign exchange markets – as witnessed in the second half of January. Behind the increase in geopolitical risk is the global struggle for economic influence between the US and China, especially in light of the former nation’s new foreign policy doctrine as outlined in its National Security Strategy review.

There are many ways in which geopolitical developments can impact markets. Uncertainty is certainly one, as political or policy events have the potential to disrupt economic activity and inflation trends. At a corporate level, shifts in international relations can impact on sales and revenues, distribution, and costs if supply chains are disrupted.

Oil is an obvious classic example here, as history shows the commodity has been behind many previous geopolitical developments. Today, the availability of technology resources and commodities that are necessary to support electrification and further digitalisation are subject to potential geopolitical disruption. The ongoing concern over Taiwan’s future as well as competition to control access to and distribution of rare earth materials are other examples. As such, investors need to pay as much attention to geopolitical news as they do to economic data and must be prepared to adjust portfolios accordingly should markets react in a negative manner.

Potential credit stress

Credit markets have continued to be a beacon of stability. Good corporate fundamentals, positive economic growth and lower interest rates have supported corporate bonds’ solid performance. In some cases, very high-quality corporate bonds have been viewed as better alternatives to the sovereign bonds of fiscally challenged governments. Importantly, demand for credit assets has been underpinned by attractive yields, despite the spread between corporate bonds and government bonds being very low.

Currently, there is little evidence of deteriorating credit conditions. Banks are healthy and the major US banks reported solid earnings numbers for the final quarter of 2026. Equally, high yield market defaults continue to be low, with the availability of private credit – in the form of direct lending and other strategies – giving highly leveraged companies greater refinancing options.

The corporate bond market is also playing a role in financing the build-out of data centres and other AI related infrastructure, with several technology companies issuing debt. The core macroeconomic outlook does not point to any increase in credit concerns in 2026, with growth expected to remain positive and rates to remain low. However, any shift in the global consensus needs to be closely observed. Slower growth; a rapid shift in interest rate expectations; or adverse geopolitical developments, would be the key culprits for any rise in corporate credit risk premiums. 

The months ahead

Fundamentally, policy and geopolitics will remain a regular part of the global investment backdrop – as they have always been. Global security and political developments will likely remain in flux, and these factors can and probably will drive periods of market volatility.

However, economic growth remains in positive territory - the International Monetary Fund has even revised up its global growth expectations, albeit slightly - while inflation remains moderate.²

Ultimately the global economy remains resilient, inflation is moderate, and central banks are expected to ease monetary policy further. If this environment can hold, investment returns should hopefully remain supported, even if they do not mirror 2025’s substantial gains.