From artificial intelligence bubbles to a surge in government spending, and from real estate downturns to oil price spikes, these factors are likely to be among the most influential forces shaping global markets in 2026, whether negatively or positively.
1. The bursting of the artificial intelligence bubble
US technology companies fail to generate tangible commercial returns from artificial intelligence, raising questions about the logic behind massive investments in hardware, software, and related sectors. Technology stocks fall sharply, hitting the top 20% of income earners in the United States, who hold the largest share of domestically owned US equities.
After these wealth gains had supported consumer spending growth over the past two years, at a time when the bottom 60% of the population struggled, the erosion of household wealth leads to weaker consumption in 2026.
Investment in artificial intelligence also declines sharply, putting pressure on the construction and capital investment sectors, which are estimated to have contributed around one percentage point to US economic growth in 2025, and even less once imported equipment is excluded. This pullback alone would be enough to push the US labor market into a full recession.
Impact: The United States enters a recession, with Europe affected to a lesser extent. The Federal Reserve is forced to cut interest rates at a much faster pace.
2. Congress approves “tariff rebates” ahead of the midterm elections
Fiscal policy represents one of the key upside risks to growth and inflation in 2026. President Donald Trump pressures Congress to issue $2,000 checks to 150 million Americans under the label of “tariff refunds,” reviving memories of the pandemic-era stimulus packages that helped ignite inflation.
Although the math does not fully align, and tariffs have already been used to justify the so-called “big, beautiful bill,” political pressure could intensify as the November midterm elections approach.
While such measures could help the bottom 60% of US consumers struggling with high living costs, a large portion of the funds may be used to pay down debt, limiting the overall impact on growth compared with 2020–2021.
Impact: Stronger US growth and higher inflation. The Federal Reserve adopts a more hawkish stance, depending on the degree of political influence over monetary policy decisions.
3. Inflation returns due to AI-related supply bottlenecks
Many economists, particularly the more dovish voices within the Federal Reserve, expect artificial intelligence to deliver a major productivity boost that would help lower inflation. But what if this assumption proves wrong?
In the short term, massive investment in AI infrastructure could crowd out other economic activity. Data centers are expected to account for around 10% of US electricity demand by 2030, placing growing strain on power grids worldwide and increasing the risk of outages and higher prices.
At the same time, rising investment needs could create fresh supply shortages, especially as immigration rules tighten in the United States and Europe, potentially pushing wage growth higher once again.
Impact: Higher global inflation and a shift by central banks toward raising interest rates.
4. President Trump cuts tariffs as their negative effects intensify
There are two possible paths for a decline in the current average US tariff rate of around 16%. The first is a pre-election decision by the administration to reduce tariffs, as it recently did for some food products.
While lower tariff revenues would complicate efforts to secure congressional approval for “tariff rebate” schemes, the president could ultimately roll back trade barriers to ease pressure on consumer prices.
The second path would involve a Supreme Court ruling that tariffs imposed under emergency powers are unlawful, which would invalidate most country-level tariffs. The president could respond by turning to other tools, such as Section 122, which allows temporary tariffs of up to 15% for 150 days, but the outcome would be far more chaotic.
Impact: Faster growth and lower inflation, with the Federal Reserve viewing the growth impulse as dominant and slowing the pace of US rate cuts.
5. European consumers begin to spend more freely
The euro area savings rate stands at around 15%, roughly three percentage points above its pre-Covid average, and saving intentions remain elevated.
However, after rebuilding savings following the 2022 energy crisis, and with inflation stabilizing near 2%, consumers may begin to spend more aggressively in 2026, particularly if governments succeed in reducing uncertainty around pension policies.
Impact: Euro area growth rises above trend, exceeding 1.5% annually, prompting the European Central Bank to raise interest rates in late 2026.
6. Deteriorating US–China relations disrupt rare earth supplies
Tensions between Washington and Beijing eased after a direct meeting between Presidents Trump and Xi Jinping resulted in a 12-month truce, implying stable tariffs and export restrictions through most of 2026.
However, the truce remains fragile, and any miscalculation could derail it. In the absence of restraint, non-tariff measures such as restrictions on rare earth exports could be imposed.
Impact: Direct fallout for the semiconductor, automotive, and defense sectors, with potential shortages and price increases that feed into inflation.
7. A surge in oil prices driven by renewed geopolitical tensions
The biggest upside risk to oil prices remains linked to Russian supply, amid US sanctions and ongoing Ukrainian attacks on energy infrastructure.
While it is widely assumed that Russian oil will continue to find ways around sanctions, greater-than-expected effectiveness could shrink the surplus expected in 2026, posing upside risks to the current Brent crude forecast of $57 per barrel.
Developments involving the United States and Venezuela add further uncertainty, alongside the fragility of the ceasefire in Gaza, which could revive supply risks from the Middle East.
Impact: Slower global growth and higher inflation, with central banks inclined to raise rates or slow the pace of easing.
8. Fiscal stress as bond investors lose confidence
So far, investors have been surprisingly tolerant of the US fiscal deficit trajectory, supported by economic uncertainty and lower interest rates. However, US public finances remain fragile, with the deficit expected to stay in the 6–7% range.
Investor concerns over the scale of debt issuance could intensify, particularly if fiscal expansion coincides with accommodative monetary policy and renewed inflation fears.
Europe is not immune, as pressures could spread from France amid rising spending demands, especially on defense. Bond yields could rise sharply, with the economic outcome depending on central bank responses: a return to quantitative easing, or forced fiscal tightening.
Impact: Painful cuts to government spending, particularly in Europe, and weaker growth.
9. China slips into a deeper slowdown as the property correction intensifies
After stabilizing in early 2025, property prices resumed a faster decline from mid-year. Inventories remain high, and real estate investment continues to weigh heavily on growth.
Default concerns resurfaced after Vanke requested an extension on a bond repayment. Despite supportive policies in 2024, momentum faded in 2025, with growing calls to allow the cycle to run its course, a stance that could carry serious risks.
Impact: Erosion of household wealth, deterioration in bank asset quality, and entrenched pessimism that undermines the shift toward consumption-led growth.
10. The Ukraine war ends with a comprehensive and lasting peace deal
If peace negotiations succeed, the economic impact will depend on how unresolved issues such as territorial recognition are handled, and on the durability of the ceasefire.
In an optimistic scenario, reconstruction efforts could lift economic activity and sentiment in Eastern Europe. Lower energy prices, depending on sanctions relief, could also support global consumption.
However, energy analysts note that Russian oil supplies have not declined significantly in recent years, limiting the impact on the global supply balance, though supply risks would diminish. The gas market would see a larger effect if Europe resumed purchases of Russian gas.
Impact: Lower energy prices boost global growth, potentially prompting some central banks, including the Bank of England, to adopt a more accommodative stance than expected.
