Macro House View 2026

Geopolitical volatility has continued to dominate the news cycle since our last Macro House View in November 2025, from military actions in Iran, Nigeria and Venezuela to territorial disputes over Greenland. However, as long-term real assets investors, we need to distinguish between macro noise and macro signals. The former distract us; the latter inform us. For example, the change of leadership in Venezuela has not meaningfully moved either the spot oil price or oil futures, so has not impacted our inflation outlook. That said, events in Venezuela have contributed to the perception of heightened geopolitical tension. This uncertainty, coupled with increased concern about reflationary government spending in major markets such as Japan and the U.S., has driven the price of precious metals to record highs (Figure 1). This spike is also not a big driver of our inflation outlook. But the fact that markets are so concerned about risk—whether from geopolitics or inflation—tells us something meaningful about the need for humility regarding our base case outlook and the rising risk of exogenous shocks that could change our current view.

Figure 1: Gold and silver price, $ per troy ounce

Beyond geopolitics, policymakers in Japan, China, Australia and the U.K. have sent meaningful macro signals since in November 2025. In Japan, the new Prime Minister has won a significant majority in the parliamentary elections held in early February. She has signaled an even looser fiscal policy stance should her party win a larger majority. Consequently, the Japanese 10-year government bond yield breached the 2.25% level for the first time in nearly 30 years and the forward curve has moved up sharply (Figures 2 and 3).

Chinese policymakers have similarly announced a further loosening of fiscal and monetary policy to overcome ongoing deflation in the housing market.

Figure 2: Global 10-year government bond yields, %

Figure 3: Japan government benchmark yield curve, %

Australia is the third major market where the signal coming from policymakers has shifted markedly, but in this case, it reflects expectations of a tightening, rather than a loosening of policy. Economic growth has been surprisingly robust, as shown by the S&P Purchasing Managers Index in Figure 4. The Australian corporate sector is expanding rapidly, with a reading well above the “boom-bust” level of 50, the highest of the major markets we cover. Inflation has also proved sticky, given pressure from the tight housing market. As a result, the Australian central bank is now signalling that the next move in interest rates will be higher, rather than lower.

Figure 4: S&P Global PMI, Major Markets Index, 50 = no change

Finally, in the U.K., the latest signal from the government has been one of fiscal tightening, with an array of tax increases announced in the November 2025 Finance Bill. This signal, coupled with deflationary pressure coming from decelerating wage inflation and falling house prices, has led to a re-assessment of the U.K.’s inflation outlook. We can see this most clearly from the marked decline in the U.K.’s inflation-linked government bond yield curve (Figure 5), which stands in sharp contrast to what we are seeing in Japan.

Figure 5: U.K. inflation-linked government bond yield curve, %

Of course, there is no better signal than actual hard economic data from the real economy. Looking once again at Figure 4, it’s worth pointing out that all of our major markets have corporate sectors reporting strong expansion—even in the formerly sluggish eurozone. This growth is quite something, given all the geopolitical noise that was thrown at the global economy in 2025. Indeed, looking back at 2025, it is remarkable how robust Asian export growth has been in general, and China’s trade numbers in particular, given the U.S. tariff increases imposed last April. This resilience partly reflects the fact that the effective U.S. tariff rates were quickly lowered. But it also reflects a more meaningful shift toward increasing trade inter-dependencies among the nations outside of the U.S. Indeed, some of the best-performing major equity markets in 2025 were in countries that are manufacturing exporters, not least China and South Korea. So, once again, the data is perhaps more reassuring than one might have expected given the macro noise, and this should give real assets investors some comfort as we voyage into 2026.

Incorporating the signals—as opposed to the noise—into our latest macro forecasts yields a few modest changes. Figure 6 shows that we have modestly upgraded our forecasts for China and Singapore to reflect their export resilience and, in China’s case, the increased policy loosening. We raised Australia’s forecasts to reflect recent corporate sector strength. The U.S. also got a further modest upgrade but it’s front-loaded to reflect the boost to consumer spending this year from the federal tax cuts. That said, we have not made similar upgrades in our employment forecasts but have maintained our previous modestly positive stance. This is because we do not have the conviction to make large changes at a moment of profound structural economic change.

Figure 6: Real GDP growth, 2026-2030, % Y-o-Y

How much job growth will result from economic growth in this upcycle is a topic of great debate—both within our team and the wider macro community—because so much of the growth will be driven by productivity increases and capital expenditure (capex) related to the adoption of AI at an enterprise level. AI is likely to result in some near-term job disruption for people engaged in more repetitive white-collar work. However, history tells us that technological breakthroughs usually create more jobs in the long run, but different ones. We are skeptical of anyone who claims to have perfect foresight on this matter, given the rapid pace of AI development and adoption, as well as the difference between the hype and the reality of AI adoption. We are staying close to the hard macro signals and trying to parse out the macro noise.

Turning to the nominal side of the economy, Figure 7 shows our forecasts for inflation. The only meaningful changes are to the outlooks for the U.K. and Singapore. We revised down our U.K. inflation forecast based on an expectation of tighter fiscal policy and deflation coming through from the housing market. In Singapore, the recent weakness of the Singapore dollar will likely have a modestly inflationary pass-through. In general, our stance is that the overall level of consumer price inflation will hover around 2% in most major markets, with higher readings in the consumer-led economies of the U.K., the U.S. and Australia, and lower readings in the export-led economies in Asia.

Figure 7: CPI inflation 2026-2030, % Y-o-Y

Finally, our bond yield forecasts continue to reflect a “higher for longer” view incorporating the reflationary fiscal policies being run in China, Japan, the U.S. and the U.K., despite the country’s recent tax increases and continued high debt loads. We see 10-year government bond yields running in the mid-4% range for Australia, the U.K. and the U.S., and in the mid-3% range in the eurozone (Figure 8).

The big changes to our bond views are in Japan, the U.K. and France. We have further increased our terminal bond yield forecast in Japan to 2.75%, reflecting the new signals around loose fiscal policy and the pricing that has occurred in the fixed-income market. In the U.K. we are forecasting a modest fall in the 10-year government bond yield, reflecting easing inflationary pressures and tighter fiscal policy. However, in France, where fiscal policymakers are struggling to even pass a finance bill, let alone rein in public spending, we have pushed up our forecast for the government bond yield. We feel that this reflects the relative sovereign credit strength of most European markets. Sadly, France now has more of the U.K.’s fiscal attributes rather than Germany’s, so we expect its debt to trade at a wider premium to the German Bund than has historically been the case (Figure 9).

Figure 8: Global 10-year government bond yields, %

Figure 9: European 10-year government bond yields, %

Despite all the policy noise thrown at the global macroeconomy in 2025, it is worth restating that it performed reasonably well in 2025, and we expect it to continue to do so over the medium term. Our forecasts also reflect a view that the worst of the consumer price inflation spike is behind us. Furthermore, while bond yields will remain elevated, we also know that lending markets are continuing to improve, so that in some major markets, the all-in cost of debt is falling. Not a bad macro environment for real assets investors. That said, we are highly cognizant that we live in a world of elevated risk and continue to take a prudent approach to reflecting our macro views into our real assets underwriting. We remain vigilant about both the signals and the noise.

Download the Macro House View 2026.