Let’s start with a key point. When we talk about the “global economy,” we’re not talking about one neat story. China’s still moving at a decent pace, growing around 4.9%, while places like Australia, Europe and the UK are crawling along closer to 1%. That’s sluggish by comparison. If you’re following this Economics Briefing, your investment approach needs to reflect that kind of split.
For investors, it sets up a clear theme heading into 2026. Money tends to flow where there’s stronger growth, better earnings momentum and policy settings that don’t keep changing on a whim.
The US Outlook – Why Markets Are Buzzing (and What It Means)
Let’s talk about the US, because it’s still leading the charge.
US Stocks Have Outperformed
Compared to a lot of global portfolios, the US market has really stood out. Here’s how things looked:
- The S&P 500 has gained around 16% this year
- The Nasdaq is up about 22%
- Since the April dip, the Nasdaq’s bounced back nearly 45% to 50%
That kind of performance matters, especially if you’re comparing it to more conservative or default super options which often deliver lower, more “average” results. It also proves something that pops up often in any Economics Briefing worth reading – your results are shaped more by where you put your money than how hard you try.
Tariffs Are Still Market Movers
Tariffs have been back in the headlines, stirring up volatility. They’ve been used more like a bargaining chip in trade deals. So far, the inflation impact hasn’t hit as hard as some predicted.
Still, a valid argument was made – the real bite might come later due to stockpiled inventories. But modern supply chains don’t leave much room for delay, so how this plays out depends on the sector.
Investor tip: treat tariffs like a wildcard. They can shake markets quickly, even if the longer-term inflation effect is unclear.
Why the Fed Prefers PCE Over CPI
The Fed keeps a close eye on Personal Consumption Expenditures (PCE). It’s a broader and more flexible read on what people actually spend, unlike CPI which is based on a fixed basket.
2 unavoidable household costs were highlighted:
- Energy
- Food
A good example is beef. Droughts have shrunk herd sizes, cutting supply and driving up prices. Even large-scale feedlots can’t make up for the fact there aren’t enough cattle.
Investor takeaway: not all inflation is about demand running hot. Sometimes it’s supply issues that just take time to fix.
AI, Data Centres and the Investment Boom
This part of the US outlook is massive. Capital spending tied to AI is shaping up to be one of the biggest investment stories of the next couple of years.
According to this Economics Briefing, here’s what’s on the table:
- Around $680 billion going into data centres this year
- Another $750 billion lined up for next year
- That’s close to $1.3 trillion over two years
- 4 big names – Google, Microsoft, Amazon and Meta – are responsible for about $200 billion a year of that spend
This kind of money shifts things:
- Big firms borrow cheap, crowding out smaller players
- Market gains stay concentrated at the top
- Energy demand rises fast because data centres need reliable, low-cost power
Investor takeaway: AI is not just about fancy apps. It’s reshaping construction, utilities, energy demand and financial markets.
US Housing and Jobs – Mixed Signals
New home builds in the US have slowed, but existing home sales are picking up. A major reason is the 30-year fixed mortgage. It protects homeowners from rising rates but also stops them moving, since selling often means refinancing at a higher rate.
As cuts become more likely, people might start moving again. That kicks off other activity – think movers, tradies, furniture and landscaping.
On the job front, unemployment’s sitting at around 4.2%. That’s close to full employment, but the growth is slowing. Some layoffs, especially in tech and lower-income sectors like food processing, are raising eyebrows.
Investor tip: headline numbers can look fine while pressure builds quietly underneath. That’s often when central banks decide to cut rates.
US Market Outlook for 2026 – Bullish, But Top Heavy
The general outlook for the US is upbeat:
- Growth forecasts are sitting between 2.5% and 3.5%
- Big banks expect earnings growth between 13% and 17%
- Capital spending linked to AI is a big tailwind
The catch? Market gains are being driven by a small group of dominant players. If they stumble, the whole index feels it.
So here’s how to play it:
- If you’re after broad exposure, keep an eye on concentration risk
- If you’re going niche, look at sectors that feed the AI build – energy, infrastructure, utilities, hardware and so on
Back Home: Australia’s Slower Climb
Markets in Australia have lifted, but not at the pace of the US. The ASX 200 is up around 5% this year.
Productivity – The Big Constraint
Productivity continues to be a weak spot. When wages grow faster than productivity, it puts pressure on costs and weakens competitiveness.
There’s also a mismatch with skilled migration. People arrive with qualifications but struggle to find work in their field. That drags down both productivity and individual outcomes.
Plus, job creation is tilting towards the public sector, where wages are rising faster than in the private sector. That might help short-term stability but doesn’t boost economic output the same way private enterprise does.
Investor insight from this Economics Briefing: Australia needs better productivity to see meaningful growth, not just more people.
Housing – Supply Is the Real Fix
Policy fixes like grants and rent caps often end up lifting prices instead of improving affordability. The real issue is supply – or the lack of it.
We’re talking about faster approvals, more builds, fewer delays and a bigger workforce to get it done.
Investor takeaway: demand boosts without supply solutions just keep housing expensive.
The Real Feel of Inflation – Beyond the Official Numbers
Some reckon “real” inflation feels more like money supply growth, which has been quoted at around 9.1%. That’s a lot higher than the official CPI figure.
This Economics Briefing points out that it’s not about saying CPI is useless, but recognising that subsidies and government policy can distort the lived experience.
If your investments aren’t outpacing how quickly your cash is losing value, you’re going backwards in real terms.
The RBA’s Balancing Act
The Reserve Bank is in a tight spot. Inflation is still hanging around. Growth, on the other hand, is pretty weak.
If they cut rates too early, inflation could flare up again. If they wait too long, they risk crushing what little momentum is left. And once you start cutting, raising again later hurts credibility and confidence.
Energy policy was flagged as a risk too. If business costs rise sharply due to energy, that’ll drag on growth.
Investor tip: the Aussie market might still climb, but it won’t be smooth sailing if inflation sticks and growth stays patchy.
Quick Investor Checklist for 2026
- Build a plan that can handle bumps in the road. Volatility is part of the deal.
- Watch the three big forces that shape interest rate expectations: energy prices, supply chains and jobs.
- Back the AI story, but mind the concentration. Big money is flowing, but it’s not evenly spread.
- Be selective in Australia. The economy is concentrated, so your investing approach should be too.
- Protect your real purchasing power. Aim for after-tax, after-inflation returns that keep you ahead of the cost-of-living curve.
