2026 global outlook: Risk and reward amid an AI revolution
We devote much of our outlook to tackling key questions for investors raised by this period of extraordinary technological change.
The following is an extract from our 2026 global outlook.
The first half of this decade has been characterised by a global pandemic, multiple geopolitical crises and dramatic developments in artificial intelligence. The latter trend seems set to dominate the second half.
Investor hopes for far-reaching applications of AI have certainly led risk assets in 2025. Albeit narrowly focused gains have driven many markets to significant returns, as at the time of writing, even after the recent pullback in some of the more speculative areas of the investment universe, such as crypto.
We share in some of this excitement. Economists have long debated the macro consequences of technological change. Joel Mokyr, an economic historian and recent Nobel laureate, has shown that innovations like railroads, automobiles and personal computers have had transformative effects.
AI is likely to prove just as transformative as it reinvents the ways in which we live, work and play – if not even more so, in our view. And yet, as we noted back in 2023, just as this new industrial revolution based around human-AI collaboration ushers in vast opportunities, it also presents manifold risks.
Key questions
As investors, we can prepare for some of the probable implications of AI, such as the explosion of public and private debt issuance to support the so-called ‘hyperscalers’. But we accept that many of the questions raised by the era-defining technology remain unanswered.
That is why much of this outlook, which includes views from across our global Asset Management business, is devoted to the theme. Key takeaways include:
- AI may have a far bigger impact on the economy and markets than historical parallels suggest
- The US economy will likely determine which of a wide range of scenarios for global growth plays out in 2026
- Carefully constructed index, equity and or multi-asset strategies could help investors overcome AI-related challenges and concentration risk
- Amid the focus on fiscal challenges, fixed income investors can take comfort in the notion that the US is still seen as the ‘cleanest dirty shirt’
Even as the spring’s tariffs-related volatility recedes into distant memory, we recognise that both geopolitics and domestic politics retain their ability to wrong-foot markets.
As such, we explain why we seek to shun ‘reckless prudence’ in an increasingly uncertain world, as well as offer an optimistic take on emerging markets and discuss how innovative exposure can be achieved.
We also show how an evolution in liability-driven investing seeks to balance preservation and growth objectives.
Our futures
As we consider what the next five years and beyond may bring, our purpose at L&G feels ever more relevant: “Investing for the long term. Our futures depend on it.”
With foundations stretching back to 1836, we have seen more than one period of transformational change. Throughout them all, we have sought to capture the opportunities, and manage the risks, on behalf of our clients.
Read our 2026 global outlook.
Key risks
(†) Any references to companies are mentioned for illustrative purposes only and does not constitute a recommendation. The value of an investment and any income taken from it is not guaranteed and can go down as well as up, and the investor may get back less than the original amount invested.
Whilst L&G’s Asset Management business, where relevant, has integrated financially material Environmental, Social, and Governance (ESG) considerations into its stewardship practices and investment decision-making, funds that do not include specific ESG goals within their objectives might not pursue responsible investing goals.
Assumptions, opinions, and estimates are provided for illustrative purposes only. There is no guarantee that any forecasts made will come to pass.
