Same market projections for the new year

According to James Mackreides, forecasts from banks and brokers are as optimistic as ever this year, but there is less conviction regarding the US

I don't take the deluge of forecasts that investment banks and brokers generate at the beginning of the year very seriously, but it's not because the analysts who create them are idiots. The majority of workers in these positions are intelligent and well-versed. However, due to the investment industry's propensity to reward moderate bullishness at all times, very few are able to express a truly unconstrained viewpoint.

As Jeremy Grantham contends, few analysts are free to write that they believe investors should have zero exposure to the US. Whether right or wrong, this is undoubtedly a strong opinion, but merely stating that investors should have "market weight" in US stocks doesn't provide much context.

However, if you read enough of these reports, you can at least determine whether the consensus is true or not. Even though this is by no means scientific, a brief summary of the ideas for 2026 would likely look something like this.

Should investors continue to support AI since spending is expected to increase in 2026?

Spending on AI will continue to increase, but there is a greater risk of not investing because of the potential for a technological revolution. The fact that fund managers appear to be more concerned than brokers about the possibility of an AI bubble is noteworthy. Although there is far less optimism than last year regarding whether America will outperform the rest of the world after falling behind in 2025, stocks will rise. There is a lot of interest in Japan, but no region appears to be a clear favorite. Bond markets will benefit as interest rates decline, particularly in the US. However, no one is particularly enthusiastic about traditional credit (such as corporate bonds), not because they are predicting catastrophe but rather because valuations are rather steep and riskier bonds don't offer much more yield than safer ones. On the other hand, despite a few high-profile defaults over the past year, interest in private creditthat is, loans made directly by investors to businessesremains high. The pressure on oil will not go away. Gold prices will continue to rise. Due to limited supply and growing demand from AI infrastructure, industrial metals like copper and aluminum could perform well.

In comparison to the previous year, the currency markets appear to have changed the most. It was widely believed at the time that the dollar would continue to appreciate due to foreign investment entering US markets and Donald Trump's policies being beneficial for the US trade deficit. Ultimately, the dollar declined in value relative to the majority of major currencies during the first half of the year before stabilizing.

Based on the assumption that interest rates will decline more quickly in the US than in other countries, the majority of forecasters predict a weaker dollar this year. The other reason to anticipate this goes mostly unnoticed: the tail risks brought about by the Trump administration's increasingly erratic policies are altering investors' perceptions of the US and increasing their propensity to search for opportunities elsewhere. We should anticipate that continuing in light of this week's events.

USD/EUR exchange rate.