Macro & Strategy - July 2026

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All Around the World

The global macroeconomic backdrop remains favourable despite emerging risks

“These are crazy days, but they make me shine
Time keeps rolling by”

– Oasis

At the midpoint of 2026 , with the world fixated on the FIFA World Cup and a crowded geopolitical calendar, the time is right to look all around the world and take stock of the global economy . The message is not that everything is calm . It clearly is not . But the broad macro picture is more resilient than many expected at the start of the year . A powerful mix of easier financial conditions, active fiscal policy, and an exceptionally strong investment cycle tied to artificial intelligence are still driving growth .

That’s not to say that the road ahead is free of bumps. Inflation pressure has reappeared globally, trade uncertainty remains a recurring tax on confidence, and central banks are no longer moving in unison. Even so, the balance of forces looks constructive for the next few months. If investors want a simple frame, it is this one: The global expansion is broad enough to keep moving but uneven enough to require selectivity. Call it a world that is still singing from the same songbook, even if some verses are getting louder than others.

Tailwinds plus a few headwinds

Monetary policy (slight positive)

The rate cuts delivered across much of the world in 2024 and 2025 are still feeding through the system. Monetary policy works with a lag, and those lags are continuing to support activity in interest-sensitive sectors, improve financing conditions, and stabilize sentiment. In plain English, yesterday’s easing is still helping today’s growth. That support should remain visible throughout the second half of 2026, although it will gradually become less potent as we move closer to 2027.

That said, the direction of travel is becoming less straightforward. The European Central Bank raised rates in June in response to higher energy prices, the Bank of Japan has resumed tightening, and the Reserve Bank of Australia has also moved rates higher several times this year. Markets are entertaining the idea of further hikes in both the United States and Canada. For investors, the key point is that the global policy cycle is no longer synchronized.

Highlights

• The global economy remains resilient and is expanding thanks to the combined support of past monetary policies, fiscal activism, and the AI investment boom, despite the return of inflationary pressures and U.S. protectionist trade policies.
• The macroeconomic environment continues to favour risk assets, particularly equities and sectors tied to structural spending (AI, infrastructure, resources), while bonds offer more income than appreciation potential.
• The portfolio remains overweight equities and underweight government bonds, with a more neutral regional allocation given the less pronounced dispersion between markets.

This matters because it argues for a world of persistent cross-country dispersion in currencies, yields, and equity leadership. All around the world, central banks are no longer reading from the same script.

Fiscal policy (slight positive)

Fiscal policy will continue to be a potent tailwind in 2026. In the United States, the One Big Beautiful Bill, signed in 2025, has boosted demand meaningfully this year. Moreover, tariff policy is in a reversal. Tariffs collected illegally under the International Emergency Economic Powers Act are being reimbursed, adding to corporate cash flow. Regardless of the political packaging, or indeed the sustainability of such fiscal largesse, the near-term economic impact is straightforward. More money is circulating through the system, and that is supporting growth.

The story goes well beyond the United States. Military outlays have been rising for several years and are accelerating further in Europe, Canada, the Middle East, and likely Japan. Canada and Germany are leaning on their relative fiscal room and AAA credit scores to step up military and infrastructure spending. In both countries, deficit spending as a share of GDP has been increasing in recent years.

European governments, with Germany at the forefront, are attempting to reverse years of underinvestment. As a whole, the European Union’s governments were spending close to 4% of GDP in net investment in 2025, the highest number in 20 years, excluding the Great Financial Crisis.

This figure is probably going higher. In Japan, Sanae Takaichi’s government has also signalled a willingness to turn on the fiscal taps, including through potential consumption tax cuts and additional military spending. These fiscal tailwinds will support nominal growth around the world. But the way these spending measures are packaged matters. The governments’ focus on infrastructure and defence should support the manufacturing cycle, with positive spillovers to the broader commodity complex.

Artificial intelligence investment (large positive)

The one force that continues to tower above all others is the global AI- capex boom. Major U.S. technology firms are spending staggering amounts to build data centres, with recent forecasts pointing to annual outlays of US$800 billion over the next five years.

With China also expected to keep investing aggressively, and Europe having little choice but to follow suit, the theme isn’t confined to Silicon Valley. It’s a global value chain spanning semiconductors, electrical equipment, power infrastructure, engineering, and resource extraction.

For example, South Korea and Taiwan are key links in the AI supply chains through critical electronic components. Taiwan’s TSMC and South Korea’s Samsung are making money hand over fist by supplying high-end chips to big tech firms in the United States. As a result, both countries are seeing massive increases in their exports – more than 50% year over year Not coincidentally, the Korean stock index (KOSPI) has advanced almost 100% so far in 2026, while the Taiwan stock index (TAIEX) has returned in excess of 60%¹. Both countries are prime examples of the global economic spillover triggered by the AI arms race.

Resource producers benefit from rising demand for inputs such as copper. Industrials and utilities benefit because data centres require not only chips but also land, transmission capacity, cooling systems, and vast amounts of electricity. The strategic angle is also significant. Recent U.S. restrictions preventing Anthropic from making its latest model available to foreign interests send a clear signal to Canada and Europe that relying entirely on U.S. platforms may be risky. Whether local AI sovereignty efforts ultimately succeed is another matter. In the near term, however, duplication of infrastructure is itself a new source of spending, supporting the global investment cycle.

Inflation (slight negative)

The main headwind is inflation, which has re- entered the conversation. The Iran war has pushed energy prices up, adding pressure to headline inflation at a time when military, infrastructure and AI investment are already lifting demand for key inputs. In the United States, strong growth is also creating the risk of mild overheating.

Consumer price inflation is above 4%, and producer price inflation indicates more pressure in the pipeline. While oil prices have come down significantly on a peace agreement between the United States and Iran, U.S. inflation remains well above target after the most volatile elements are stripped out².

Elsewhere, policymakers are trying to prevent an energy shock from contaminating broader inflation expectations, which helps explain why the European Central Bank and the Bank of Japan have taken a firmer stance.

For investors, the inflation issue is less about a return to the chaos of 2022 and more about the possibility that disinflation stalls at levels still above central bank comfort zones. That is enough to keep policy rates higher for longer and enough to limit valuation expansion in rate-sensitive areas of the market.

Trade policy (slight negative)

Trade policy remains another drag. More than a year after Donald Trump returned to office, U.S. trade rules are still in flux. The Supreme Court has struck down some tariffs, leading to a refund program. As a result, the goods tariff decreased to about 8% from a peak of 12.5% in October. Even so, the administration has found other ways to rebuild barriers, including targeted duties of roughly 10 to 15% on specific countries. The tariff rate has thus most likely bottomed out. The legal path may remain messy, but the strategic direction is clear enough. Protectionism is not going away.

Meanwhile, the CUSMA negotiations continue without much visible progress. We do not expect the agreement to collapse, but we do expect uncertainty to persist, especially with Washington sending mixed signals (Macro & Strategy - June 2026). Trade policy isn’t the macro risk that it was in 2025, but it is still lurking in the background, weighing on business investment and fragilizing supply chains.

Investment implications

This backdrop continues to support an equity overweight. A strong economy, still-supportive fiscal settings, and major structural investment themes will continue to be a favourable mix for risk assets in the short-to-medium term. Even so, that doesn’t mean every market or every sector should be treated equally. It means the bull case will remain intact as long as growth stays firm and earnings continue to digest higher interest rates. Cyclical exposure still makes sense, especially where it overlaps with military, infrastructure, electrification, and AI-related capital spending. Commodities also look positioned to deliver attractive returns in this environment.

As for fixed income, the story is more nuanced. Yields are likely to remain elevated and could even move somewhat higher, which limits the scope for capital gains. But the carry available in bonds has become genuinely attractive again. That makes fixed income less of a price appreciation story and more of an income story, with select opportunities where markets may be underpricing policy divergence or recession risk. For balanced portfolios, this is a reminder that high yields are not always bad news. Sometimes they are simply the entry ticket to better future income.

Conclusion

Net, the outlook for the global economy remains fairly constructive despite a growing list of risks. The mix of monetary tailwinds, fiscal activism, and AI-driven capital spending still outweighs the drag from inflation and trade frictions, at least for now. The world economy isn’t accelerating everywhere at once, but it’s still moving forward in enough regions and sectors to keep the expansion alive.

For investors, the right mindset is neither complacency nor paranoia. It is disciplined optimism. Stay constructive on risk assets, stay aware of inflation and policy divergence, and keep an eye on the areas where structural spending is reshaping markets in real time. After all, when the cycle is being pulled by several engines at once, it pays to keep looking all around the world.

Positioning

We continue to overweight equities but have moved to largely neutral regional allocations. The backdrop for equities remains essentially unchanged. The asset class continues to be driven by earnings, and those earnings have surprised persistently to the upside, particularly in the United States, where profitability has been exceptionally strong and forward expectations continue to be revised higher. AI capex continues to underpin the asset class and reinforce the positive backdrop.

That said, higher expectations are baked in, and speculative activity has increased at the margin. In that context, we see less value in expressing strong regional tilts and prefer a more balanced allocation across countries while remaining overweight the asset class, as regional asymmetries are perhaps less clear than earlier.

We continue to underweight government bonds. While yields are more attractive than in prior years, the broader macro regime continues to be challenging for duration. Inflation has proven persistent, and the combination of elevated fiscal deficits and rising sovereign issuance continues to exert upward pressure on term premia, limiting the scope for a sustained rally in government bond markets.

More importantly, recent market behaviour has reinforced the point that bonds do not reliably hedge risk assets in a regime shaped by inflation shocks and geopolitical risk, reducing their diversification value.

This aligns with our broader macro framing, where equities and real assets remain better vehicles to express views on nominal growth and inflation, while duration is more exposed to adverse repricing when markets demand higher compensation for holding long-dated government debt. We remain on the lookout for opportunities to increase duration but are on the sidelines for now.

In currencies, the “sell America” trade that hurt the U.S. dollar last year appears to have paused amidst exceptional U.S. corporate earnings performance. Meanwhile, several European currencies are considered less attractive, given lower domestic interest rates and, in the case of the pound sterling in particular, an interaction between fiscal dynamics and reliance on foreign capital that leaves the currency sensitive to shifts in global rates and term premia.

Against that backdrop, we continue to favour currencies with more robust macro underpinnings, in an environment still defined by inflation uncertainty and cross-country divergence.