What to expect from the markets in 2026? The bubble risk for AI, the interest rate scenario, growth

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Economics editorial team

The analysis of Filippo Casagrande, chief investments of Generali: various elements for growth, such as low energy prices, the solidity of corporate profits and possible expansionary measures by the Trump administration

In the global financial landscape, the year 2026 promises to be an important crossroads for markets, asset classes and investment strategies. To understand which trends could emerge and how to best position ourselves, we interviewed Filippo Casagrande, Chief Investment Officer of Generali Investments. With consolidated experience in managing global portfolios and a careful vision of macroeconomic changes, Casagrande shares with us his predictions on risks, opportunities and key dynamics that could influence financial markets over the next year.

What should we expect from the markets in 2026?

«2025 ends with a substantially positive macroeconomic picture.
Growth in the United States has shown signs of a strong recovery after a subdued first quarter and the tariff war seems to have resolved itself, without leaving too heavy an impact on the main exporting countries. In the United States the big question mark is the health of the labor market. After the slow but steady increase in unemployment during 2025, the next few months will be essential to understand whether we will see a further deterioration or stabilization, as outlined in the Federal Reserve’s forecasts. In our view, 2026 sees several elements supporting growth, such as low energy prices, solid corporate earnings and possible expansionary fiscal measures by the Trump administration ahead of the midterm elections.
Another issue to monitor is the trend of inflation. The numbers well below expectations in the United States published a few days ago should be taken with reserve, given the impact of the shutdown on the quality of data collection.”

What will happen in the States?

«We believe that the United States is still in an above-average inflation scenario, given the rigidity of services inflation, still well above 3%. This environment of growth around potential and still moderately high inflation is positive for real assets. The stock market can continue to benefit from these factors, also helped by a recovery in liquidity following the Fed’s decision to discontinue Quantitative Tightening and restore the purchase of Treasury bills. The main fears arise from high valuations, but these are – at least in part – justified by profitability levels in the corporate sector well above the historical average. In the US bond market, we start the year with a neutral stance on Treasuries. Greater clarity is needed on the actual drop in inflation and on the orientation of the Fed itself after the end of Jerome Powell’s mandate in May to think about a more significant drop in yields, after that which has already occurred during 2025″.

And in Europe?

«Europe also shows reassuring dynamics in terms of growth, with an acceleration of the German economy after several quarters of stagnation. The expansionary fiscal policies decided by Berlin should begin to have an effect during 2026thus supporting the entire Eurozone economy. The past reduction in ECB rates and the fall in energy prices constitute two further fundamental elements supporting growth and this should favor the Eurozone stock market, which remains much cheaper in relative terms despite the excellent performances recorded in 2025. As regards the bond market, the increase in rates at the end of 2025 constitutes a good entry point for us to lengthen duration. Real rates are aligned with the growth potential of the Eurozone and this is usually an element of strong support for the bond market. We also continue to favor carry strategies, including Italian BTPs (strong fiscal consolidation) and Investment Grade credit (good corporate balance sheets).”

Will the run in AI-related stocks continue?

«The topic of Artificial Intelligence will remain topical also in 2026, considering the huge investments partly announced and partly already implemented in recent quarters. What we will see, however, is greater diversification between winners and losers in this race. We have already seen a preview of this trend in recent months, with investors more focused on company fundamentals, and in particular on the ability to support investments through own resources. Those who do not have sufficient cash generation have been punished by the marketwhich appears to demand a higher risk premium for more indebted companies. On the other hand, those with solid fundamentals can continue their upward journey.”

How do you see the monetary policies of the Fed and ECB?

«We see different approaches because while for the Fed the market sees a couple of rate cuts during 2026 (to be precise 54 basis points from current levels), for the ECB this expectation no longer exists. This is thanks to the good performance of the economy, with growth back in line with potentialand to an inflation that is close to the target, but with a certain persistence in the services component, always solidly above 3% in terms of annual growth. As already mentioned above, the Fed is weighed heavily by the uncertainty about the future of its governance, which is looming under pressure from President Trump. Jerome Powell’s mandate is expiring and rumors about his successor are growing. The fear of some analysts is that the Fed’s line will flatten the US Treasury’s wishes, with a more massive rate cut to lighten the burden of interest expenses. A less independent Fed can cause volatility not only on the long maturities (+10 years) of the US Treasury yield curve, and also greater volatility on risky assets in general.”

Where to invest your savings?

«As far as equities are concerned, we have a preference for the United States, Eurozone and Emerging Countries, while we are neutral on Japan and the United Kingdom. We continue to overweight structural themes, such as gold stocks – again with very positive performances in the final month of 2025 – the European defense sector, European banks (also brilliant in the last month), and the US Tech sector. In the AI-related sector, the selection of individual securities becomes increasingly important, especially for those companies attentive to cash generation. As far as the bond world is concerned, we are raising the allocation on German Bunds from neutral to positive.”

Is it worth investing in our public debt?

«We confirm our preference for Italian BTPs, rewarded by the government’s prudent fiscal policy. The 10-year BTP-Bund spread fell below 70 basis points, the lowest level since 2009. We remain more cautious on French Oats, given the risks to the implementation of the necessary austerity measures for the reduction of the high public deficit. On US Treasuries, we reduce our preference relative to German Bunds and take a neutral stance, awaiting greater clarity on inflation data and the performance of the labor market. We confirm our interest in bonds in local currency from emerging countries while in the credit sector, we confirm our preference for seeking spreads using rating and seniority levers”.

January 1, 2026