2026, a year of monetary normalization, technological disruption and geopolitics
January 12, 2026
By Mario Catalá
From Portocolom AV, we welcome the newly begun year of 2026, with the main financial markets navigating very close to all-time highs, in an environment that presents certain similarities to the previous year. Expectations of moderate but positive growth globally seem to be continuing to see the technology sector, and especially Artificial Intelligence, as key players.
The evolution of inflation will also be crucial, which, although approaching pre-pandemic levels, is not yet fully under control. The situation is particularly vulnerable in the United States, where there is a possibility of seeing spikes due (among other things) to the effect of the tariffs imposed by Trump throughout last year. Indeed, the US president will be one of the most influential figures globally (geopolitical moves, pressure on the Federal Reserve to lower interest rates, imposition of new tariffs, etc.), even more so considering that the US midterm elections will be held in November.
Below is a summary of the outlook for the current year in terms of economic growth, inflation, and central bank decisions. We conclude by focusing on the main trends and risks that we believe could significantly influence the performance of both the various global economies and financial markets.
Global Growth
As mentioned, the world is expected to continue growing in 2026, although at a slightly slower pace than the previous year. Major international financial institutions suggest that growth could fall from the 3.3% projected for the end of 2025 to between 2.7% and 3.1% in 2026. This scenario would be accompanied by several factors that could act as tailwinds for economic activity: improved financial conditions resulting from lower interest rates, a boost in technology investment (led by artificial intelligence), increased investment in infrastructure and defense (especially in Europe), and an expected, though still uncertain, easing of trade tensions, primarily between the United States and China.
Geographically, the different economic blocs will once again grow at very different rates. Thus, while the Western world is expected to experience very moderate growth (around 2% in the United States and 1% in the Eurozone, according to IMF data), the major Asian countries will once again be the true global engines of growth in 2026, with China and India leading the way (estimated growth of 4.4% and 6.3%, respectively).
Inflation
The inflationary dynamic that began after the 2020 pandemic continues to normalize, although there are still some areas of the world where it persists. Globally, inflation is projected to decline to the 3.5–3.6% range in 2026, following the easing of energy and goods shocks experienced during 2022 and 2023. Even so, the IMF and several research firms argue that a structural component, driven by geopolitical realignment, the energy transition, and trade fragmentation, will make it very difficult to see inflation levels below 2% in the future.
In the United States, the Fed forecasts a gradual decline to 2.0–2.4% between 2026 and 2028, although with upside risks related to tariffs and fiscal stimulus. In Europe, both the ECB and the European Commission project a decline to 1.6–1.9% in 2026, already below the European Central Bank’s target.
The main global inflationary risk continues to be the persistence (or reactivation in some cases) of trade conflicts. Temporary tariff reductions between the US and China will expire at the end of October, and a new tariff increase could negatively impact the supply of goods, reigniting fears of a potential stagflation scenario.
Central Banks
The global cycle of interest rate cuts, particularly intense in the 2024–2025 period, is now entering a more tactical and fragmented phase, depending on the geographical area we consider. This makes it clear that we are, for the first time in a long time, experiencing a period of divergent monetary policies between blocs.
At its last meeting in December, the US Federal Reserve lowered rates by 25 basis points, setting the monetary policy level in the 3.50%–3.75% range, and current expectations place the terminal rate slightly lower (around 3.00%–3.25%). However, uncertainty remains regarding the Fed’s next moves, partly due to the unreliability of the latest employment and inflation data published in the United States (undoubtedly influenced by the economic downturn).
In the Eurozone, the ECB is nearing the end of its rate-cutting cycle and is expected to maintain rates close to 2%, with official rhetoric emphasizing the need for a «data-dependent» approach, given the combination of inflation very close to the target and still-weak growth.
In Japan, on the other hand, where inflation has remained above target for an unusually long period, the Bank of Japan has already begun monetary normalization and could continue raising rates in 2026, following the milestone increase to 0.75% in 2025 and the gradual recovery of the wage cycle.
Trends / Risks for 2026
- Artificial Intelligence: Undoubtedly, artificial intelligence has been one of the major players in 2025, and it is expected to continue to be so for some time. It has contributed to the growth of financial markets as a key cross-cutting driver of growth, thanks to the enormous amount of investment in technology it has entailed, along with the need for energy and digital infrastructure. However, it also raises questions about potential bubbles if monetization does not keep pace with spending. Hence the concern about the extremely high valuations we are seeing, especially in the US, where multiples exceed 22 times (in terms of price per unit of earnings).
- Concentration of earnings in a few stocks: The concentration of weight, and therefore risk, in a few stocks in the main stock market indices continues to break records. For example, in the US S&P 500 index, the top ten stocks (out of a total of 500) account for more than 40% of the index’s market capitalization, and the famous «magnificent seven» (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms, and Tesla) represent the majority of earnings growth. The possibility that one of these «mega-companies» might disappoint the market in its earnings reports could lead to significant declines in equity markets.
- Geopolitical Risk: In addition to the conflicts in Ukraine and the Middle East, the United States intervened in the Venezuelan government at the beginning of 2026 with the arrest of President Nicolás Maduro on January 3. Although financial markets have reacted relatively calmly to this event, it remains to be seen how shipping prices, raw materials in general, and energy prices in particular will react if any of the ongoing conflicts escalate. Given the current circumstances, in a context where the United States appears to have shifted its geopolitical stance, adopting a clearly aggressive approach, we cannot rule out the emergence of new conflicts in the short term. In recent days, President Trump has continued to threaten the status quo of several countries, warning of direct intervention in the territories of other Latin American countries such as Colombia and Mexico, and even speaking openly about his intention to invade Greenland, a constituent nation of the Kingdom of Denmark, which, along with the United States, was one of the twelve founding members of NATO in 1949.
- Federal Reserve Independence Under Pressure: Throughout 2025, Donald Trump has made no secret of his pressure on the Federal Reserve to lower interest rates. Both on social media and in public appearances, the American president has leveled all sorts of attacks against Fed Chairman Jerome Powell, explicitly trying to influence a more loose monetary policy. He has also attempted to remove Powell and replace several governors with others loyal to him. This type of action can damage the institution’s credibility, generating financial instability, jeopardizing the country’s still not fully controlled inflation (in the event of untimely rate cuts), and calling into question the dollar’s status as an international reserve currency.
- Debt and Fiscal Deficit in the United States: The United States has a historic level of fiscal deficit, with debt that in absolute terms has already reached $38.5 trillion (US dollars) (before the pandemic it was «only» $23 trillion) and is expected to reach nearly 120% of GDP by the end of 2025. This factor could strain the Fed’s independence and also affect fixed-income markets, increasing bond risk premiums, generating volatility in the yield curve, and negatively impacting the dollar in the medium to long term (in the short term, rising yields may positively affect the dollar, but in the long term, the loss of confidence in it as a risk-free asset could harm it).
- US Midterm Elections: The midterm elections will be held in November, an event that has historically caused considerable volatility in financial markets in the months leading up to the vote. Political and legislative uncertainty typically increases, causing corporate investment and strategic decisions to be put on hold, thus slowing the economy. However, this year, this will occur within a context of significant geopolitical and trade tensions, which could intensify sharp market movements in the face of decisive and unexpected political decisions.