Milan, 4 December 2025 - UniCredit's Investment Institute is pleased to announce the release of The Compass 2026, its flagship annual outlook offering a European perspective on global macroeconomic trends and financial markets. This second edition provides a roadmap for navigating a world marked by persistent uncertainty, structural shifts, and emerging opportunities.
"In a world where geopolitical tensions and technological transformation coexist, agility and diversification are no longer optional—they are essential. Our goal with The Compass 2026 is to provide investors with a clear framework to navigate uncertainty while identifying opportunities that align with long-term structural trends," said Manuela D'Onofrio, Head of Group Investment Strategy at UniCredit and Chair of The Investment Institute.
"Market proved to be resilient despite sizeable shifts in the global economy and now it enters 2026 with a mix of opportunity and thoughtfulness. We remain supportive on equities despite not-cheap valuations in US stocks, powered by the AI revolution. The earnings momentum and a sustainable cash flow-to-capex ratio of big-tech companies are the key factors to look at in 2026. Asian tech companies offer a cheaper diversification opportunity in what we expect to be a continuation of the AI story. Increasing deficits in EU and US will bring pressure on the long end of their yield curves" noted Fabio Petti, Head of Cross Assets Investment Strategies at UniCredit and Co-Chair of The Investment Institute.
"If 2025 experienced Trump's second-term earthquake, 2026 will see the aftershock. The global economy is likely to shake again next year, although the magnitude of the shock will be far more contained than what we have experienced this year" added Edoardo Campanella, Chief Editor of The Investment Institute.
2026: A Year of Geoeconomic Adjustment, not Upheaval
2026 opens with cautious optimism but lingering volatility as the global economy adjusts to the aftershocks of Trump's second term. Tariff truces have eased last year's turmoil without resolving deep trade frictions, leaving markets to navigate a fragmented landscape of rival blocs and hardened U.S.-China competition in technology and resources. Washington's incremental approach masks persistent risks of political interference, while Europe struggles between security reliance on the U.S. and economic ties to China. The dollar's safe-haven status faces scrutiny, AI dominates the narrative, and investors should brace for turbulence—less severe than 2025, but far from calm.
Macroeconomic Analysis by Geography
Global GDP growth is forecast at 3.1%, supported by adaptive private-sector strategies despite entrenched trade frictions.
- The US economy remains solid, with growth projected at 2.1%, driven by fiscal support and AI investment. Inflation will stay above target at 2.9%, while the Fed is expected to deliver two rate cuts by year-end, bringing rates to 3.50%.
- The eurozone shows resilience, with GDP expected to rise 1.0%, aided by fiscal stimulus and NGEU investments. Germany's fiscal bazooka begins to fire, while France faces political uncertainty and Italy benefits from EU recovery funds. Inflation is set to hover near 1.8%, allowing the ECB to keep rates on hold at 2.00%.
- CEE growth is set to accelerate in 2026, driven by stronger external demand, investment, and EU fund absorption, with GDP expected between 2.0% and 3.3%. Consumption remains the main engine, supported by tight labor markets, though Romania and Slovakia will lag due to fiscal consolidation. Inflation should stay within target ranges except in Hungary and Romania, keeping central banks cautious but leaving room for rate cuts in Poland, Romania, and Serbia. Fiscal risks tied to political dynamics loom in Hungary, Poland, Romania, and Czechia, while 2027 will bring reduced EU funds and election-driven uncertainty.
- In China, growth slows to 4.1%, reflecting structural headwinds from real estate stress and weak domestic demand. The PBoC is likely to ease further to support activity.
- Japan posts modest growth (0.8%) amid gradual BoJ tightening, while the UK remains stuck in low gear (1.0%) as fiscal tightening and weak productivity weigh on prospects.
Market Forecasts. Cautious Optimism: Risk-On Meets Geopolitical Realities
Global markets enter 2026 with a mix of opportunity and complexity. Structural shifts—entrenched tariffs, fractured geopolitics, and supply-chain rewiring—are now permanent features rather than temporary irritants. Equities retain upside potential, led by US stocks powered by AI-driven productivity gains and fiscal investment. Europe's outlook is supported by defence and infrastructure spending, though soft demand and slower tech adoption temper momentum. Fixed income faces headwinds from heavy sovereign issuance and gradual central-bank easing, keeping yields elevated. Currency markets anticipate a gentler decline in the USD, while commodities remain subdued, with oil under pressure and gold supported by long-term safe-haven drivers.
- Equities: Upside potential persists, led by US stocks on the back of AI-driven productivity gains. The S&P 500 is forecast to reach 7,600, while Euro STOXX 50 may climb to 6,200.
- Fixed Income: Heavy sovereign issuance and limited monetary easing will keep yields elevated, with the 10Y UST seen at 4.30% and Bunds at 2.90% by year-end.
- FX: EUR-USD likely trades in the 1.15-1.20 range as USD weakness moderates.
- Commodities: Oil prices subdued at USD 60-65/bbl, while gold remains supported at USD 4,100-4,400/oz.
Top Stories for 2026
1: Europe's 2026 Reality Check
Europe enters 2026 with ambitious plans for defence, competitiveness, and migration reform. However, progress is likely to be incremental rather than transformative. National initiatives, particularly Germany's fiscal expansion, will carry most of the load, while common EU projects such as SAFE (Security Action for Europe) aim to foster industrial integration. Political fragmentation and limited fiscal capacity remain key constraints.
2: Europe's Critical Raw Materials Dilemma
Critical minerals such as lithium, cobalt, and rare earths have become strategic assets, essential for clean energy and advanced manufacturing. Europe's resource scarcity and reliance on imports from BRICS+ countries create vulnerabilities that could derail its green transition. The EU's Critical Raw Materials Act sets ambitious targets for 2030, backed by EUR 22.5bn in investment, but supply diversification and recycling infrastructure will take years to materialize.
3: Risks and Opportunities in the Private Credit Market
Private credit has grown rapidly over the past decade, offering diversification and attractive returns compared to traditional high-yield bonds. Recent defaults in the US have raised concerns about credit quality and potential spillover effects on the banking system. While our base case for 2026 anticipates more idiosyncratic defaults without systemic stress, the sector's expansion—often involving lower-rated borrowers and lighter regulation—warrants close monitoring. For investors, private credit remains an opportunity for enhanced yield, but selectivity and rigorous due diligence are essential, particularly as refinancing risks and opaque exposures could amplify volatility in a downturn.
What If...
1: AI Momentum Falters
AI has been the dominant force in equity markets, but vulnerabilities loom. Excess capacity and rising leverage in AI infrastructure could trigger a correction if monetization proves slower than expected. While long-term benefits are likely to endure, the adjustment phase could be volatile.
2: Europe Steps into the Spotlight
Europe could emerge as a credible alternative to US markets if fiscal expansion, deeper integration, and stronger institutions gain traction. A more liquid Bund market, surging investment in defense and digital infrastructure, and a firmer euro could reposition Europe as a strategic anchor in global asset allocation.
Investment Allocation
Asset allocation for 2026 reflects resilience and selectivity. Overall, the strategy emphasizes diversification and prudent risk management amid policy complexity and geopolitical uncertainty.
- Overweight: Emerging market equities and EM debt, supported by attractive valuations and structural tailwinds.
- Neutral: Global equities and developed-market bonds, given high valuations and fiscal pressures.
- Quality Bias: Preference for issuers with robust balance sheets, resilient cash flows, and strong governance standards.
Full document is available here: The Investment Institute by UniCredit - The Compass Checkpoint
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Media Relations e-mail: MediaRelations@unicredit.eu