Last week, our Head of Investment, Mike Lea, and Financial & Investment Analyst, Tom Birtles, attended the 2026 Global Economic Outlook Conference in London, hosted by Oxford Economics. We have recently partnered with Oxford Economics to further enhance our investment committee’s analysis of markets and portfolio positioning for FPC clients.
The conference brought together economists and institutional investors to explore the outlook for global growth, markets and policy at a time of heightened geopolitical uncertainty, rapid technological change and shifting trade relationships. One of the clearest messages was that, despite the intensity of current global challenges, the global economy remains more stable than many headlines suggest, which should support financial markets during 2026.
A resilient global picture
Global GDP growth has held steady at just under 3% in real terms in recent years and is forecast to remain at similar levels through 2026. Asia-Pacific continues to lead growth, followed by North America and Europe. Supply chains are changing because of US tariffs, which is a long-term structural trend and will naturally have a braking impact on business investment whilst the full impact becomes apparent.
Rather than focusing on short-term shocks, discussions centred on the structural forces shaping the next phase of global growthand the impact on different economic regions.
Three forces shaping the global economy
Countries are increasingly using trade barriers, such as tariffs, as part of their long-term economic plans, rather than as short-term measures. These policies are changing how goods move around the world.
In the US, tariffs have not yet significantly pushed up prices for consumers, but they have shifted where trade happens. Chinese exports to the US have fallen sharply, while exports to Europe and the rest of Asia have grown. This creates additional competition for export-driven economies. In some cases, goods are being routed through other countries before reaching their final destination to mitigate tariff impacts
Looking more broadly, trade between the US and China is gradually reducing. China continues to increase its exports overall by building stronger trading relationships with other regions. The result is a global trading system that is becoming more fragmented and more regionally focused, rather than centred on a small number of dominant trade relationships.
The use of artificial intelligence is growing quickly, particularly among large US companies, alongside increased investment in technology and digital infrastructure. The five largest investors – Google, Microsoft, Amazon, Meta and Oracle – reported spending $241 bn on AI investment in 2025 and plan in excess of $400bn in 2026. This step-up is worth ½% of GDP on its own and many other companies are investing in AI too.
However, the economic benefits of AI are not yet clearly showing up in productivity or growth figures.
There is a lot of excitement and expectation around what AI could deliver in the future, but for now its impact on the wider economy is still developing. This will take many years and potentially first impact economies with large service sectors, like the UK, rather than manufacturing. Financial markets are driven partly by sentiment, but eventually company valuations need to be supported by earnings. There may well be a period whereby greater question marks surrounding the benefits of AI emerge, before the long-term impact is felt.
Different countries are taking very different approaches to managing their economies. Some, including the US, Japan, and China, are using higher government spending and support to encourage growth, even where there is a risk of increasing inflation given already reasonable demand in the economy like in the US. Others, including the UK and much of Europe, are taking a more cautious approach.
Interest rates are still expected to come down in the US and UK, but perhaps more slowly than previously hoped. Europe however is likely at the nadir of their easing cycle. Japan is an outlier among major economies in raising interest rates, as the ‘normalisation’ of its economy after decades of deflation is forcing the Bank of Japan to act.
Clearly many countries have few levers to pull from a public deficit perspective, and lower interest rates would be desirable to cover the cost of carrying such heavy debt loads, but the recent inflation scare means a cautious path ahead.
What this means for investors
The overarching message from the conference was not one of imminent crisis, but of ongoing structural change:
Geopolitical risk has awoken from decades of rest, and periods of market volatility are likely more commonplace. For investors, this reinforces the importance of diversification, discipline and long-term planning. Periods of economic transition can create uncertainty and with that an increase in alarmist news headlines but standing back and considering the long-term view and investing accordingly should see the benefits of change emerge.
At FPC, we continue to monitor these global developments closely to ensure client portfolios remain well-positioned in a changing world.