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Investing.com -- Global equities are set for further gains next year despite mounting concerns over artificial intelligence risks, geopolitics and valuation pressures, according to a new 2026 outlook from Barclays.
The bank argues that markets should “continue to climb the wall of worry,” supported by monetary and fiscal easing across the U.S. and EU, as well as improving economic breadth.
Barclays analyst Emmanuel Cau said equities have already delivered “another strong year, up 18%, despite hiccups along the way,” driven largely by the AI boom.
But the bank warned that AI is “no longer a one-way-trade, nor the only show in town,” noting that dual stimulus should lift U.S./EU GDP above trend and broaden participation across sectors.
The bank sees Europe particularly well placed to benefit from reflationary forces, citing “cheaper valuation, lower crowding and easier earnings comps,” though it flagged politics as a persistent risk.
Barclays is targeting an SXXP level of 620 in 2026, about 9% upside, with an overweight stance on cyclicals and banks.
While AI remains a pivotal theme, the bank highlighted its vulnerabilities. Economies’ “over-reliance on the AI narrative raises risks if the music stops,” though Barclays believes AI-related capex will “stay elevated” and is backed by strong balance sheets and fast-growing adoption.
Barclays expects three additional Federal Reserve rate cuts next year and an end to quantitative tightening, arguing that “financial repression underpins risk assets” as governments manage rising debt loads.
Earnings, meanwhile, are expected to “do the heavy lifting,” with European EPS growth forecast at 8% in 2026.
The bank also stressed that investor positioning still leaves “dry powder,” pointing to the $7.5 trillion parked in money market funds and unexecuted corporate buybacks.