Global Macro Environment
2026 is defined by AI transformation at unprecedented scale, $5-8 trillion in buildout through 2030 potentially pushing U.S. growth above its historical 2% trend. The investment environment features higher leverage across public and private sectors, structurally higher cost of capital, and concentrated market gains requiring conviction calls.
Key uncertainties include rising global yields that could destabilize assets, AI energy constraints with data centers potentially consuming 15-20% of U.S. electricity by 2030, U.S. policy shifts and Fed dynamics, and China GDP at approximately 4.5% with downside risks from trade and real estate.
Oil remains a critical variable for 2026. Brent is expected to trade in the $58-69 range, with prices below $58 representing a material risk for spread widening, particularly in GCC credit markets. GCC fiscal positions remain resilient at current prices, but a sustained break lower would pressure budgets and increase issuance needs.
Global Equities
U.S. equities remain overweight on the strength of the AI theme, robust corporate earnings, continued Fed easing, and reduced policy uncertainty on the trade front. Europe warrants a neutral stance given lagging earnings growth relative to the U.S., though selective opportunities exist, with defense spending emerging as a medium-term catalyst. Emerging markets are tactically overweight strategically, with China is best approached selectively through AI and automation sectors given persistent property stress.
Global & Regional Fixed Income
Long-dated U.S. Treasuries are facing increased pressure due to term premium concerns driven by high debt servicing costs and price-sensitive buyers. EM hard currency debt is gaining relative appeal amid expectations of a weaker USD, improving fiscal and monetary discipline across issuers, and spreads near decade lows supported by limited supply. Private credit is entering a new phase with established lenders proving resilient while smaller entrants face pressure manager selection and due diligence are critical.
2025 delivered record performance for the region, with fixed income outperforming equities. Issuance reached $140-150 billion, up 20% year-on-year, with sukuk comprising approximately half of total supply and the spread differential between sukuk and conventional bonds compressing. For 2026, issuance is forecast at approximately $150 billion with Saudi Arabia the largest issuer at $45 billion or more.
Disclaimer: All information provided is for educational and awareness purposes only and does not constitute a recommendation or invitation to make any investment decision. Past performance is not indicative of future results. Please consult your financial advisor before making any decisions.
Derayah Financial is licensed by the Capital Market Authority under license number 27-08109, dated 2008.
