Global Financial Markets

Markets are pricing in a benign outcome, but three key uncertainties threaten that consensus. Geopolitical escalation, political interference in monetary policy, and disappointing productivity growth could rapidly change the outlook. This report examines how these risks could reshape markets.

The markets expect further rate cuts by the Fed, partly due to increasing political pressure. We do not expect this to happen because the US economy may perform better than expected next year, with much depending on the interaction between the labour market and economic growth and the US Supreme Court's ruling on import tariffs. The ten-year US interest rate is the canary in the coal mine and determines how far the Fed can go with interest rate cuts.

The outlook for shares and economic growth is fairly positive for 2026. But what if things go wrong? We see three potential spoilers.