Name: 2026 will be another year of solid growth, says analyst
Uploaded: 2025-12-12T17:37:49.777Z
Duration: 5 min 41 s
Description: Daniel McCormack, head of research and economics at Macquarie Asset Management, discusses his 2026 outlook.

Daniel McCormack, head of research and economics at Macquarie Asset Management, discusses his 2026 outlook.

A financial analyst appearing on CNBC stated that global economic growth is expected to reach approximately 3.5% in 2026, aligning with historical averages. The US is projected to remain strong, while Europe and the UK are anticipated to continue their recoveries, supported by modestly lower interest rates.

The analyst emphasized the benefits of diversifying investment portfolios with private markets and highlighted asset-backed finance and infrastructure debt as attractive options. Additionally, the analyst noted that artificial intelligence could provide a significant uplift to productivity, potentially delivering tangible economic benefits within the next five years.

2026 will be another year of solid growth, says analyst

Yeah, hi, Juliana and Steve. Great to be with you. Look, in 2026, we think it'll be another year of solid growth. We think global growth will be around about 3.5%, which is roughly in line with its long run average. We expect the US to remain strong. We think recoveries are steadily but surely gaining ground in Europe and the UK. And we also think that interest rates will move modestly lower in the US and UK in the main. And so big picture that adds up to an environment where we've got healthy growth, modestly falling interest rates. That's pretty constructive for asset prices in general. So we think 2026 will be a pretty decent year for returns yet again. When it comes to portfolio construction, the classic sort of portfolio advice is 60-40. In recent years, there's been suggestions that maybe that needs to change to incorporate some private markets, and in some cases, a substantial portion of private markets exposure. How do you think about 60-40 going into next year? Yeah, I mean, we obviously like private markets. We think an exposure to that gives you extra returns, lower risk, improved diversification. So, you know, I wouldn't say that the 60-40 portfolio is dead. It will probably always have its place. But we think some kind of allocation to private markets, 20%, 25% is going to improve the robustness and performance of your portfolio over the longer run. Daniel, very good morning to you. And what about the credit markets as well? You said there in your first answer, modestly lower interest rates in 2026. Do you think modestly lower is good enough for some of the more leveraged plays out there? Is there going to be a little bit of a canary in the coal mine in the credit markets? I think the credit markets are quite tricky at the moment. If you look at public markets, for example, spreads there are very tight. So those markets price perfection. You know, we think the macroeconomic outlook is fine, as I said before, but nonetheless, just given where those markets are priced, we'd be pretty cautious on public credit. Private credit too has had a few little wobbles recently and we're mindful of that. But we do think there are segments that are interesting, you know, particularly asset-backed finance tends to have lower default rates, higher recovery rates. And you've just got that extra security of the asset there. So asset-backed finance is one place that we think is interesting. Are you getting paid enough for your risk though, Daniel? You did mention that in your copy here, credit spreads remain tight by historical standards. Yeah, certainly, as I said, that's the case in public markets. So I think there the risk-return trade-off is less attractive. But for example, infrastructure debt, infrastructure is a very reliable asset class. And one I think that is underestimated by investors in terms of its ability to deliver in difficult times. So if you were looking at asset-backed infrastructure debt, we think that is a place where the risk-adjusted returns are actually quite attractive. Daniel, I'm keen to get your thoughts on how you think about the productivity uplift from AI. This is a huge part of the sort of medium-term narrative here that could change the dynamics of productivity and really change the business models of so many companies out there. How are you thinking about this uplift? And when do you think we're going to see sizable, sort of tangible impact from AI here? Yeah, this is a very interesting question. It's a very difficult question because really nobody knows. Now, there's been a bunch of studies done recently which suggest, broadly speaking, we could see an uplift to global labor productivity of three quarters of a percentage point. In the U.S., it could be around one or a little bit above that. And those studies are based on what AI has been doing very recently in terms of its progression. But I guess big picture, we look back to the late 1990s. And what happened in the late 1990s was that with the IT and internet boom there, you saw an uplift in the U.S. of labor productivity about 1.3 percentage points. And our view is that AI is a more powerful technology for productivity than the internet. So we think it could actually be more than that. And it could be as much as one and a half, maybe 1.8 percentage points in the U.S., which is a very big number. So this could really be transformative. I mean, we think that the Goldilocks economy is behind us, generally speaking, as in that period of ever lower interest rates and very mild deflation is a thing of the past. But if we got those kinds of productivity gains from AI, we could see a return to that Goldilocks-type economy. What's the kind of timeframe you're looking at when you talk about this size of an uplift? Very difficult to say, Juliana. So if you look back through the history of technological breakthroughs, often the lag between breakthrough and productivity gains has been really quite long. But the lag is getting shorter and shorter and shorter over time. That in itself is a function of technology in our view. So for the AI, could it come through in 2026? It could. May not, right? The lag could be a little bit longer than that. But what really impresses us about AI is its task progression. It is getting faster and faster at more and more difficult tasks over time. And so we think that that lag between breakthrough and productivity gains will be quite compressed with AI. We'd expect it to come through in the next five years, might be 2026, might not be, but within the next five years would be.

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