Summary
Over the past year, enthusiasm over artificial intelligence (AI) lifted investor confidence and drove markets to new heights—but in 2026, gravity could reassert itself. Lazard Chief Market Strategist Ronald Temple explores the forces that stand to shape markets in his annual outlook.
- United States: Elevated tariffs may lift inflation through the first half of 2026 while tighter immigration enforcement reduces labor supply and GDP growth. AI is likely to face increased investor scrutiny.
- China: The new Five-Year Plan prioritizes stability over near-term growth, focusing on high-tech sectors and reducing US dependencies. The housing crisis will continue to exacerbate economic imbalances, with limited expected fiscal stimulus.
- Eurozone: Low interest rates and energy prices, rising real wages, and continued fiscal expansion support growth in 2026. Risks include uncertainty around defense spending, political fragility, and countries’ willingness to implement economic reforms.
- Japan: Prime Minister Sanae Takaichi will pursue an expansionary fiscal and regulatory agenda reminiscent of Abenomics, but she will face policy-related tensions that her mentor did not encounter.
- Global Markets: US exceptionalism may fade as non-US opportunities continue to outperform—aided by a weaker US dollar. Investors are likely to discriminate more skeptically between AI winners and losers.
- Rates & Policy: Divergent central bank policies could meaningfully increase volatility. While short-term rates fall, large sustained fiscal deficits are likely to put upward pressure on long-term yields, leading to further steepening of developed market yield curves.
Important Information
Published on 17 December 2025
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