Global Multi-Asset 2026 Outlook: Tailwinds fill the sails despite turbulent seas

Amid a surge in government spending, shifting politics, and persistent inflationary pressures, global markets face a new era of volatility – and opportunity. As US growth outpaces the world and other regions begin to regain momentum, investors must adapt.

Sebastian Mullins, Head of Multi-Asset and Fixed Income, Schroders Australia explores why 2026 may bring both opportunity and instability, and how dynamic asset allocation and fresh thinking will be key to navigating the fiscal-driven landscape ahead.

Last year we predicted that 2025 would see continued US economic exceptionalism while the rest of the world stumbled out of their doldrums, but warned that Donald Trump would add increased volatility as investors wrestled with the question of whether growth would trump inflation. This broadly played out, with the US experiencing exceptional above-trend growth, while places like Europe, Emerging Markets and Australia saw growth recover from 2024 lows. However, as Trump’s focus oscillated between his pro-growth policies and protectionist agenda, we saw massive swings after Liberation Day, both in equity market performance and the global economic outlook.

Investors keep asking us, is the wild ride over? Unfortunately, we think not.

A new market protagonist

As governments around the world shift from a decade of fiscal constraint, we’re truly in a regime where fiscal policy plays a leading role in economic outcomes. This is a 180 degree change from a period of fiscal austerity, where loose monetary policy was boosting inflation up towards central bank targets, to a period of fiscal largesse, where central banks will be forced to keep rates higher for longer to try and get inflation back down towards their target.

Governments will be forced to spend on defence, upgrade infrastructure, realign supply chains, and secure access to critical resources, on top of dealing with increasing inequality and delivering on the populist policies they promised in order to get into government. This fiscal spending will lead to higher debt levels, which will require higher growth and inflation to inflate the debt away. Higher inflation will likely lead to higher economic volatility, but also positive equity-bond correlations, leading to more asset price volatility.

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