2026 Global Equity Outlook
Second Quarter
Key Takeaways
Developed Markets: Artificial intelligence (AI), defense spending and other trends are powering a positive outlook for global equities.
Emerging Markets (EM): We think emerging markets are likely positioned for another year of robust growth after outperforming in 2025.
Developed Markets
Global Equity Outlook: Why Growth Drivers May Broaden
We see a steadily expanding set of opportunities in global growth stocks for the upcoming year, supported by multiple growth drivers.
AI remains a dominant theme despite increased scrutiny. The world’s largest technology companies are increasing their AI-related capital expenditures, while a broader ecosystem of businesses reports growth driven by this technology.
Beneficiaries include companies involved in construction, cooling, energy and the manufacturing of components like optical connectors. Additionally, more businesses are discovering practical applications for AI, further driving growth. Early use cases include improved diagnostics and content personalization.
We believe the U.S. economy will continue growing, while other regions are accelerating. Non-U.S. and emerging markets outperformed in 2025, and we expect conditions to remain supportive in 2026.
Geopolitical conditions can also influence economic growth. For example, higher U.S. tariffs have prompted several nations to pursue new trade deals, which could strengthen companies in those markets.
Europe Draws Strength from Defense, Aerospace and Rate Cuts
Europe is ramping up defense and aerospace spending, boosting growth across a wide range of firms. Power generation and distribution, especially related to AI, also appear promising.
Recent interest rate cuts might lift rate-sensitive sectors of the economy, potentially backing growth in banking, housing and infrastructure.
We also believe certain firms in the consumer discretionary sector have growth potential. This includes companies focused on healthy lifestyles, premium brands and travel.
Digitalization and AI Support Japanese Firms
Japan’s ongoing digitalization efforts are opening new opportunities for technology consulting firms and other businesses that support the country in adopting more efficient and innovative IT solutions.
AI is boosting Japanese companies involved in semiconductors, quantum computing, robotics and other forms of automation. Companies in power generation and distribution should also benefit from the AI trend.
We see strong structural support for investments. Japan’s corporate governance reforms are promoting more efficient management. Government stimulus plans could also boost consumer spending and business growth.
What’s Ahead for Developed Markets in 2026?
In our view, developed markets have significant potential in the coming months, as various factors are expected to promote economic growth.
At the same time, conditions differ across sectors, industries and companies. When investing in these equities, we believe it’s essential to use a selective, active approach combined with fundamental analysis.
Emerging Markets
Emerging Markets Outlook: Innovation and Earnings Themes
Emerging markets outperformed in 2025, and we believe this class of equities may be positioned for continued strength in 2026.
Many EM companies are leaders in various innovation-driven fields such as semiconductors, solar energy and robotics. These technologies support demand for other firms as well — for example, those involved in metals and mining, which supply essential inputs for rechargeable batteries and other devices.
EM stocks also appear attractively valued compared to developed markets. These companies are experiencing genuine improvements in their earnings. They have remained resilient despite volatility in areas like global software.
Continued weakness in the U.S. dollar could also be a tailwind for emerging markets, with Latin America a notable beneficiary. A weaker dollar may make it easier for EM central banks to continue reducing interest rates.
Navigating Tariffs and Trade Volatility
Emerging markets have adapted quickly and effectively to higher tariffs and other geopolitical shifts.
Many faced significantly higher U.S. tariffs, but they negotiated more manageable rates, which lessened much of the impact. EM companies have also adapted their supply chains and exports to the new realities.
This is also reinforced by several new bilateral trade agreements, such as those between India and the EU and between the Mercosur countries and the EU.
What Conditions Could Shape Emerging Markets in 2026?
In our view, emerging markets offer favorable fundamentals that we think could support sustainable growth this year and beyond.
Key factors contributing to this outlook include strong population growth, supportive government polices and higher domestic demand, particularly in countries such as Brazil and South Africa.
While investing in emerging markets requires a selective approach, our team continues to identify compelling opportunities across the broader EM universe. Accordingly, we maintain a positive outlook for the remainder of 2026.
Explore Our Emerging Markets Capabilities
References to specific securities are for illustrative purposes only and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.
International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
Historically, small- and/or mid-cap stocks have been more volatile than the stock of larger, more-established companies. Smaller companies may have limited resources, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies.
Diversification does not assure a profit nor does it protect against loss of principal.
Generally, as interest rates rise, bond prices fall. The opposite is true when interest rates decline.
Past performance is no guarantee of future results. Investment returns will fluctuate and it is possible to lose money.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.