2026 Prospects
Part 1: Asset Allocation
Our outlook for 2026 is split into six parts to be published over the next two weeks:
Asset Allocation
Regional Liquidity Cycles
US Dollar
Bonds and the Yield Curve
China
Risk Assets & Crypto
In 2026, World business will continue the fight for capital supremacy. This is a battle for continued US dollar dominance in the face of the fast-emerging challenge from China. China both needs to shore up her debt-weakened financial markets and find new ways of driving economic growth. America is reassessing and consolidating. She is progressively breaking ties with Europe, despite deep institutional and economic links, and de facto the US appears to be replacing the pivot to Asia, with a pivot to Latin America. Like the nineteenth century World, regional hegemons are controlling what they can defend. Six years ago, our original geopolitical vision expressed in Capital Wars (Palgrave-Macmillan, 2020) was that China would extend her influence into Central Asia; the US into Latin America, and Europe into Russia. 2026 may see these Orwellian lines more clearly drawn.
The main economic struggle is between the US and China. The common feature is that national governments are closely involved in supporting their own capital. China’s strength is her dominance of manufacturing; America’s lies in the huge US Treasury bond market and by association the US dollar. Can China continue to expand manufacturing, and can America continue to fund cheaply are key questions?
