After the Federal Reserve delivered its third rate cut of 2025, markets are now looking ahead to the policy stance for 2026.
Stefan Hofer, Chief Investment Strategist APAC at LGT Private Bank, shared key perspectives in an interview with Moneycontrol:
Fed Outlook: Easing Bias Likely in 2026
- Hofer expects the successor Fed to maintain an easing bias through 2026.
- Rate cuts are likely to be front-loaded in the first half of 2026.
- Policymakers may shift priorities:
- More focus on preserving low unemployment
- Less concern about inflation pressures
This would mark a notable change from the aggressive, inflation-driven stance of the earlier tightening cycle.
Global Wildcard for 2026: Europe
The biggest unknown for markets next year, Hofer notes, is the possibility of the war in Europe ending.
A resolution could generate a significant peace dividend—boosting risk sentiment, trade flows, and European assets.
China Outlook: Sub-5% Growth Likely
Hofer expects China’s economy to expand between 4.5%–5% in 2026, assuming:
- No major fiscal stimulus, and
- No sharp monetary easing.
Key Drag:
A persistent oversupply in the real estate sector continues to weigh on growth.
What Could Improve Sentiment:
- Emerging signs of higher inflation, which China actually wants
- Low valuations in China’s technology sector, which Hofer sees as a pocket of opportunity compared with the high valuations in the U.S.
Bottom Line
The global macro setup for 2026 hinges on three factors:
- A dovish, growth-protective Fed
- Geopolitical clarity in Europe
- China’s stabilisation despite real estate headwinds
More updates soon—stay tuned with CurrencyGyan for clean, crisp market insights.
