Northern Trust 2026 Global Investment Outlook: Continued Economic Resilience, with Increasing Market Risks

Core Insights - The global economy is expected to continue growing in 2026, avoiding recession despite ongoing risks, supported by strong fundamentals in equities and a new inflation regime affecting fixed income investors [1][3][4] - Active management is emphasized due to structural divergence within asset classes, with a preference for equities over bonds [2][3] Global Economic Outlook - Resilience in the global economy is noted, with supportive policies and lower interest rates expected to enhance economic momentum [3] - Real GDP growth is projected to remain under 2% globally, with the U.S. and Canada leading at an estimated annual growth of 1.5% [4] Asset Class Highlights - U.S. Equities: Strong fundamentals support equities, but stretched valuations and narrow leadership indicate a need for selectivity [3] - Treasury Inflation-Protected Securities (TIPS): Inflation is expected to remain above average at about 3%, making TIPS a compelling hedge [3] - Global Bonds: Diversification through global government bonds is recommended as reliance on U.S. Treasurys is outdated [3] - Private Assets: The private credit landscape is evolving, with a shift towards more complex strategies due to tight spreads [3] - Real Assets: Infrastructure investments are highlighted as beneficiaries of long-term trends in technology and energy transition, providing resilience against inflation [3]