Key Highlights

• Global equities expected to deliver around 11 percent returns in 2026

• Valuations are high across the US Europe Japan and emerging markets

• Earnings growth replaces valuation expansion as the main return driver

• AI investment and global diversification remain strong long term themes

• Volatility and selective stock picking will define investor success

2026 Global Markets Returns Remain But the Easy Money Phase Is Over

Global markets are entering 2026 with a calmer and more realistic outlook compared to the strong optimism seen last year. After a powerful rally in 2025 that lifted stock prices across regions, investors are now facing a tougher environment. Returns are still expected, but they will require more careful choices and patience.

According to research from Goldman Sachs, global equities could deliver close to 11 percent total returns over the next 12 months, including dividends. However, these gains are expected to come mainly from earnings growth rather than rising valuations. This marks a clear shift in how markets may reward investors.

High Valuations Increase Sensitivity to Risk

One key change in the current market cycle is that high valuations are no longer limited to the US. Expensive stock multiples are now visible across Europe Japan and emerging markets as well. This makes global equities more sensitive to negative surprises such as weak earnings or policy shocks.

Despite this, analysts believe that a major market fall is unlikely unless there is a recession. Stable economic growth remains the main support for risk assets. For investors, this creates a narrow path forward where upside exists, but mistakes are punished more quickly than before.

Diversification Is Making a Comeback

After years of US dominance, diversification has again become an important driver of returns. In 2025, investors who spread their exposure across regions were rewarded as US markets underperformed several global peers.

This trend is expected to continue in 2026. Diversification is no longer just about geography. Differences between growth and value stocks, and between sectors, are becoming more important. Broad index investing alone may not be enough, making stock and sector selection more critical.

China’s Growth Is Driven by Exports

China remains a major factor in global markets. Goldman Sachs expects China’s real GDP growth to reach 4.8 percent in 2026, higher than most estimates. This growth is driven mainly by exports rather than domestic spending.

Chinese companies have reduced their dependence on the US and expanded into emerging markets and high technology exports. At the same time, the property sector continues to struggle, now in its fifth year of decline. This means China’s recovery is uneven and focused more on industrial strength than consumer demand.

AI Investment Remains a Powerful Theme

One of the strongest long term trends is the rapid rise in artificial intelligence investment. Large technology companies are expected to spend around 540 billion dollars on capital expenditure in 2026.

History shows that such investment cycles are often underestimated. Even now, AI spending remains below past technology peaks when investment reached a higher share of GDP. This suggests further growth ahead, benefiting not only tech firms but also semiconductors, data centers, energy companies and industrial suppliers.

Oil Markets Show Weak Sentiment

Commodities present a mixed picture, especially oil. Despite large reserves in countries like Venezuela, political changes have had little effect on prices. The reason is simple: increasing production requires years of investment and stable policies.

Investor surveys show very bearish views on oil, possibly more negative than supply conditions justify. This gap between sentiment and fundamentals will remain an area to watch closely.

Volatility Is Becoming Structural

Adding a risk focused view, One River Asset Management founder Eric Peters warns that markets may see higher highs and lower lows in the years ahead. High valuations, geopolitical risks and a new generation of speculative investors could keep volatility elevated.

Instead of relying on large static hedges, a diversified and flexible risk approach may work better. Volatility is no longer temporary but part of the market structure.

Final Takeaway

The global market outlook for 2026 is not negative, but it is more demanding. Returns are still supported by economic stability, earnings growth and strong themes like AI investment and export led growth. However, high valuations and shifting leadership mean the easy gains of the past are over.

For investors, success in 2026 will depend less on overall market direction and more on choosing the right regions, sectors and companies where real growth and resilience exist.