2026 Outlook
Executive Summary
For the Federated Hermes 2026 outlooks series, we brought in our three CIOs – in liquidity, fixed income and equities and our head of private markets – as well as key portfolio managers across the business for their sector-specific views.
This year, we wanted to keep things simple and so, for the majority of outlooks, the first question we asked was: What’s your one contrarian view going into 2026?
Responses were varied, with some managers citing Fed independence, others highlighting a stronger-than-expected US economy or the resilience of sustainable lending as potential themes. Elsewhere, the ongoing effect of tariffs, the breakneck speed of AI development, China tech self-sufficiency and the drive towards electrification remained front and centre. That’s not to say it’s all sweetness and light: several of our outlooks also highlight the risk of a market dislocation in the next 12 months.
What was apparent is that 2026 is unlikely to be a one-size-fits-all year. With insights from our liquidity, fixed income, equity and private markets teams, we hope that the breadth of coverage in this latest outlook series makes for an informative and interesting read.
Notable themes: 2025/6
- Global markets remained resilient after the implementation of higher US tariffs, with strong positive performance since April’s ‘Liberation Day’ sell-off.
- A weaker US dollar and elevated inflation rates, along with fiscal debt, remain concerns.
- Equity markets, supported by earnings growth and AI capital expenditures, still have upside potential, but a near-term correction is a concern.
- Fixed income continues to be a ballast even though credit spreads remain tight. Yields remain attractive.
- US Money Market Fund assets have surpassed US$7tn; yields remain competitive.
- Portfolio diversification remains key as risk markets are priced for perfection.
- The Fed lowered the Fed Funds Rate by 25 basis points in September and again in October, making for the lowest rates in three years.
- Recent Federal Reserve commentary increases uncertainty around the pace of ongoing interest rate cuts.
- As trade uncertainty begins to subside and as Germany’s fiscal stimulus gains traction, the Euro area economy is likely to remain positive into 2026.
- Sticky inflation is apparent in the UK and weak growth points to further rate cuts in 2026.
- The US remains a global GDP leader among developed economies.
