"2026 may get under way with more volatility across markets before the next rounds of policy attempts later in the year to address financial market volatility and keep the economy humming. That may be easier in Europe and elsewhere than in the US, depending on the pace of AI spending and the equity market itself, as the wealth effect drives too much of the K-shaped US economy."
"In my more than two-decade history of putting together thoughts for the coming quarter, never have I struggled more than I have this quarter with putting together some kind of "base case" for how the economy and markets will shape up in the quarter ahead and beyond. The problem in assembling a view feels as much a problem of timing anticipated developments that lie ahead rather than the actual outcomes. For a trader, though, that is simply the difference between being right or wrong."
Equity markets have been strong for three years, pushing US valuations to record highs. Early 2026 may begin with increased market volatility before policy measures later in the year aim to reduce financial-market stress and support economic activity. Europe and other regions may find stabilization easier than the US, depending on AI spending pace and equity performance. The US exhibits a K-shaped dynamic where top wealth drives consumption while lower-income households struggle with costs and debts. Timing of anticipated developments creates uncertainty for market positioning and trading decisions.
Read at London Business News | Londonlovesbusiness.com
Unable to calculate read time
Collection
[
|
...
]