UBS has released its Year Ahead 2026 outlook, highlighting “escape velocity” as the key theme for global markets next year. In simple terms, UBS expects a supportive mix of artificial intelligence innovation, government spending, and easing interest rates to help markets break away from the usual late-cycle slowdown concerns.
While risks such as geopolitical tension, deglobalisation and rising government debt remain, UBS sees a broadly constructive environment for diversified investors. Major global sharemarkets are considered expensive relative to history, but earnings growth in the United States is expected to remain solid, supported by ongoing corporate investment in AI, fiscal stimulus, and potential interest rate cuts. UBS forecasts earnings growth of roughly 10 per cent for the S&P 500 in 2025, and around 8 per cent in 2026.
Across regions, sectors such as technology, utilities, healthcare and banking are viewed as well placed. UBS also expects gradual improvements across Europe, Japan and the Asia-Pacific region. For Australia specifically, after three years of declining earnings across the ASX 200, the outlook for 2026 is more positive, although UBS emphasises that it is likely to be a stock-picker’s market rather than one where all companies rise together.
A significant part of the global outlook revolves around the ongoing build-out of artificial intelligence infrastructure. UBS estimates that between 2026 and 2030, more than 7 trillion Australian dollars of AI-related investment will be deployed, with spending projected to exceed 1.3 trillion US dollars annually by 2030. The challenge, however, is whether this investment will translate into genuine productivity gains. History suggests major investment cycles can experience periods of turbulence, and AI is unlikely to be an exception.
Beyond AI, UBS highlights several additional long-term structural themes. These include rising global demand for electricity, driven by data centres and renewable energy requirements, as well as demographic ageing, which is expected to support demand for healthcare and pharmaceutical services. Asia’s technology supply chain is also undergoing a shift toward self-sufficiency, particularly within China, which UBS sees as an important part of the broader global investment landscape.
Commodities, particularly energy, agriculture and precious metals such as gold, remain attractive due to ongoing supply constraints. Fixed income continues to offer opportunities, with bond yields sitting at levels not seen in over a decade. UBS favours maintaining high-quality, well-diversified bond exposure, particularly in Australian dollar corporate bonds.
On the currency front, UBS expects the Australian dollar and the euro to benefit as the US dollar loses some of its yield advantage once the Federal Reserve begins cutting rates.
Despite the broadly constructive outlook, several risks remain on the horizon, including capacity constraints in AI infrastructure, inflation pressures that could slow interest-rate cuts, US-China tensions, and concerns about rising government debt. UBS recommends investors manage these risks by holding adequate liquidity, maintaining exposure to high-quality bonds, retaining a portion in gold, and considering alternative investments such as hedge funds or private equity where appropriate.
Overall, the report reinforces the value of a disciplined investment plan, a diversified portfolio, and a focus on long-term structural themes rather than short-term market noise. It suggests that investors who remain patient, well-allocated, and selective may be well positioned heading into 2026 and beyond.