State Street Global Advisors (SSGA) released its "2026 Global Market Outlook: Focused on the Future," expressing a "cautiously optimistic" stance on next year's market prospects. The report highlights that upside risks from tariff uncertainties outweigh downside risks, while tailwinds such as AI advancements and expanded fiscal stimulus in major markets provide support. Overall, the firm favors equities, with a slight preference for U.S. stocks despite concerns over elevated valuations and market concentration. Non-U.S. investors may face currency headwinds from a weaker dollar but can implement hedging strategies.
The report projects continued economic growth in the U.S. and globally in 2026, though market anxiety is expected to persist. The Federal Reserve could cut rates up to three times next year, while the Bank of England is seen accelerating its easing cycle after lagging behind. The European Central Bank may pause rate adjustments in the near term, and the Bank of Japan is likely to maintain a gradual approach to rate hikes.
In Asia, both China and Japan plan to increase net fiscal spending to bolster growth. China is pivoting toward domestic consumption and infrastructure investment while reinforcing its leadership in AI innovation. Chinese equities, with their low correlation to other major markets, offer diversification benefits.
Lori Heinel, Chief Investment Officer at SSGA, reiterated the firm’s cautiously optimistic view, expecting healthy market growth in the coming year. Developed markets are anticipated to roll out further stimulus as monetary policy normalizes, supporting equities. AI-related capital expenditures and structural benefits are expected to provide additional momentum.
Fixed income markets will require more tactical positioning, with SSGA favoring sovereign bonds and selectively capitalizing on corporate bond opportunities. The firm remains bullish on alternative assets due to their low correlation to broader markets and ability to mitigate tail risks amid elevated volatility.
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