Global economy From the AI bubble to Fed fears: the global economic outlook for 2026 Analysts and investors voice caution about tech valuations and Trump’s influence on the US central bank Graeme Wearden Sun 4 Jan 2026 07.00 EST Share Investors expect global stock markets to keep rising in 2026, despite fears that the AI bubble could burst, and anxiety about chaos engulfing the US central bank. Wall Street strategists broadly expect the S&P 500 share index of US-listed companies to continue to rise over the next 12 months, but said it could be a volatile year if geopolitical tensions increase and inflation fails to fall.
## Top Threats: AI Fears, Fed Turmoil, and Private Credit
A poll of 440 investors, economists, and analysts by Deutsche Bank found that 57% believe a plunge in technology valuations, or waning enthusiasm in AI, is a top risk to market stability in 2026. Investors have never before been in such agreement about the biggest market risk for a year ahead than they are now: Deutsche Bank survey. “AI/tech bubble risk towers over everything else.” The next biggest risks: a loss in Fed independence and crisis in private credit.
## UK Stock Market Outlook: Expect More Gains in 2026
The UK stock market and the FTSE 100 blue-chip index are expected to continue their rally in 2026. The AJ Bell investment director, Russ Mould, said the omens are now quite good, with analysts forecasting 14% profit growth from the FTSE 100 in 2026. Total FTSE 100 dividend payments are expected to set a new record of £85.6bn in 2026, Mould reported, finally eclipsing the peak of £85.2bn set in 2018.
## Global Markets Forecast to Rise in 2026
UBS has predicted that “supportive economic conditions should underpin global equities, which are expected to rise by about 15% by the end of 2026”, with gains likely in the US, China, Japan, and Europe. Double-digit gains are expected on Wall Street. Under UBS’s base case scenario, the US S&P 500 index would end 2026 at 7,700 points – a gain of 12.5%. Deutsche Bank has a year-end S&P 500 target of 8,000 points (+17%), while Oppenheimer Asset Management is even more bullish, forecasting an 8,100-point year end.
## Artificial Intelligence Impact: A Key Driver of Economic Growth
After a year in which hyperscalers invested hundreds of billions in AI infrastructure, the technology sector is likely to shape long-term macroeconomic outcomes in 2026. Investors will be watching to see whether big AI companies justify their huge valuations – after strong stock market gains in 2025 – and deliver the productivity growth that policymakers are hoping for. If not, valuations could suffer.
## Commodities: Oil and Copper Prices to Watch in 2026
The price of oil will be highly sensitive to geopolitical developments during 2026, such as progress towards ending the Russia-Ukraine war and conflict in the Middle East. Forecasts of a supply glut could also push prices down. The advisory company Oxford Economics predicts Brent crude oil will end 2026 at $58 a barrel, down from $60 last month, and drop further to $55 in 2027. MeCopper prices could be pushed up by shortages. Deutsche Bank predicts a “clear deficit” for the copper market in 2026, leading
