A difficult 2025 and a better 2026

2025 presented a mixed bag: Pros included strong equity markets driven by AI, potential government efficiency from initiatives like Project 2025, and economic growth in places like India; Cons involved rising global conflict/instability, worsening climate issues, intensified AI-driven job threats, increasing misinformation, and threats to privacy, all pointing to a tech-heavy, complex world with both immense opportunity and significant challenges.

Geopolitical risks have the potential to impact the global economic outlook, influencing growth, inflation, financial markets, and supply chains. Conflicts, such as the Russia-Ukraine war and the Israel-Hamas war, fuel regional instability and have impacted energy and food security, with higher prices leading to increased inflation rates. The US-China relationship could potentially influence sourcing patterns and tariff costs, while governments in the Asia-Pacific region are implementing strategies to secure access to critical minerals.

Strategies for building supply chain resilience include greater engagement with labor unions, geographic diversification, close monitoring of environmental profiles, reshoring, and improved supplier engagement to manage tariff and geopolitical risks. Deploying technology, such as AI and machine learning, is important for enhancing resilience, with a focus on ROI. Financial impact and sustainability are critical considerations in supply chain resilience efforts.

In currencies, the dollar was broadly weaker in 2025 as investors re-allocated capital to cheaper international markets and US yields compressed relative to international yields. High carry emerging market currencies were some of the best performers in 2025 benefitting from broad dollar weakness and favorable domestic conditions.

In commodities, the oil complex was lower on the year as geopolitical tensions eased in the Middle East and the world was oversupplied with oil. Copper is a key input into data center construction and benefitted from the AI theme.

In the Asia-Pacific region, governments are implementing strategies to secure access to critical minerals crucial for the energy transition and industrial activities. Cooperation on supply chains is expected to intensify through initiatives like friendshoring and bilateral partnerships. Developed economies will seek access to critical minerals by funding overseas mining and processing infrastructure.

Making global changes in 2026 will primarily revolve around accelerating climate action, transitioning to a low-carbon economy, and leveraging technological advancements like AI. These changes require both large-scale governmental and business initiatives, as well as collective individual actions.

A rapid shift from fossil fuels to renewable energy sources (wind, solar) is essential. This involves redirecting fossil fuel subsidies, investing in new clean energy infrastructure, and setting binding roadmaps for phase-outs in transport, buildings, and industry.

The global outlook for 2026 suggests a widening gap between the rich and poor, with the global middle class losing ground due to persistent inequality, slow economic growth, high inflation, and the ongoing impacts of climate change and geopolitical instability.

While some low-income countries may see growth in 2026-27, per capita income growth is often insufficient to recover pandemic-related losses or make significant dents in extreme poverty.

Middle-income countries face challenges, and even in advanced economies like the U.S., slow wage growth and rising prices (expected inflation of 3.5% in mid-2026) will hit middle earners the hardest.

The World Inequality Report 2026 highlights that inequality is a global phenomenon that also exists acutely within nations. In almost all regions, the top 1% is wealthier than the bottom 90% combined, a trend that is exacerbating the squeeze on the middle class.

By aligning international policies, fostering technological innovation, and mobilizing individual actions, substantial global changes can be achieved in 2026 and beyond, primarily to secure a sustainable and resilient future for the planet.