AI, oil and a changing global economy
Explore our outlook to find out what could be next for markets in 2026.
Read the full report from December 2025 (PDF)Key points
AI is accelerating faster than expected
Artificial intelligence is no longer just a long-term theme. AI-related investment is exceeding our original expectations and appears to be tracking more like a major technological revolution than a typical business cycle.
We see stronger US growth ahead
We now expect the US economy to grow by 3% in 2027, driven by a structural transformation underpinned by AI investment, productivity gains and continued corporate spending.
The oil shock is creating winners and losers
Conflict-driven energy price increases are weighing on global growth and inflation, but the impact is uneven. Energy-importing regions, such as Europe, are feeling the strain more acutely than the US, where AI-driven growth is helping offset the drag.
Inflation remains a policy challenge
AI investment and higher energy prices are contributing to inflation pressures, which could keep central banks cautious. While longer-term productivity gains should help ease inflation, policymakers are likely to remain vigilant in the near term.
Long-term opportunities remain despite volatility
Markets may experience periods of volatility as investors balance elevated valuations against the transformative potential of AI. Vanguard believes the longer-term outlook remains supported by productivity gains as AI adoption spreads across the global economy.
Watch our video summary
Joe Davis, Vanguard’s Global Chief Economist, explains how AI continues to shape our outlook for 2026 and beyond.
Joe Davis: AI investment is going to continue to power the US economy and the financial markets. As we look into twenty twenty seven, our expectations are far higher than expected growth, predominantly because of the rate of acceleration in AI investment and adoption. As you know, this is a phenomenon AI that we have studied for some time. And our conviction in our view of higher than expected, non consensus growth of perhaps three percent, where Federal Reserve expects two percent, our conviction is growing that assessment.
Why? Because of the dimensions of the technology itself. AI investment by our metric continues to accelerate even faster than our heady expectations, and the rate of adoption in the workplace and personal lives continues to rise at a steady and fast clip. And so when we look into twenty twenty seven, we are optimistic on the economic front, despite some of the challenges that may remain in the headlines.
And so we look to the markets, it's one of both earnings momentum, which is very positive, but also emerging signs of market euphoria in parts of the US market. So as investors, we will have to balance the opportunity to to harness those gains while remaining diversified and not letting AI euphoria take us too far.
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Our 2026 full report and supporting materials are available to read and download. They can also help guide conversations with your clients.
Vanguard economic and market outlook for 2026
Download the full report for our views on the macro environment and the outlook for bond and equity markets.
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Summary of our 2026 outlook
Here are the key points to give you or your clients an overview of our outlook for 2026.
Download summaryVanguard 2026 economic and market outlook
Webinar
Our economists share their views on what lies ahead for global markets in 2026.
Jumana Saleheen and Shaan Raithatha
CPD: 45 min
Watch webinarRelated articles
Resilient growth keeps central banks cautious
Global growth remains resilient, supported by AI investment and economies weathering geopolitical and energy shocks. But persistent inflation is keeping central banks cautious.
Oil shock complicates central bank outlooks
What now for central banks as higher oil prices driven by the Middle East conflict create a stagflationary shock for the global economy?
The oil curve points to shock, not lasting disruption
Oil markets remain a key gauge of escalation risk for investors, with the potential to trigger unsettling price moves in the short term.
The great rotation: When valuations start to matter again
As global equity leadership evolves, valuations are back in focus. We look into the signal that could indicate the cycle is changing.
Investment risk information
The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.
Any projections should be regarded as hypothetical in nature and do not reflect or guarantee future results.
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