Last year was a bit of a lucky packet on the economic and market front. Despite United States (US) President, Donald Trump, being a polarising influence on the global landscape, a number of positives emerged and surprised in the second half of 2025.
As is customary, we like to start the year by exploring the key themes that Citadel Asset Management (CAM) believe will present both opportunities and risks for the markets and your investments in the coming year. Before we get there, however, let’s look at which of 2025’s themes will continue to play out in 2026:
- Trump 2.0 Making America Great Again (MAGA) will spill over into 2026. This year, however, the tone will be slightly different.
- Geopolitical fragmentation and trade wars was also not a once-off theme and will continue to play a significant role throughout 2026.
- The energy transition and President Trump’s continued push for fossil fuels is another theme that will impact markets over the next few years.
- The rise of artificial intelligence (AI) and tech investments was an incredibly strong theme and tailwind in 2025. This rise is part of the reason that the world and US economy were much more resilient against US tariffs last year and it underpinned productivity greatly. We believe this theme will continue to be central to the economic landscape in 2026.
CAM’s key themes for 2026
In addition to the aforementioned themes, the CAM team believes that the following factors will impact how markets react in 2026.
Theme 1: Economic fragmentation
Economic fragmentation is becoming more structural (causing long-term shifts in the global economy). It is about countries moving away from a singular globalised economy back towards regionalisation. This theme took shape during the pandemic, and was enhanced by the Russia-Ukraine war, however, the Trump tariffs have entrenched it. Countries are being forced to look at other trading partners beyond China and the US, often closer to home, and as such, we are seeing a greater diversification of supply chains. In addition, as long as tariffs remain elevated, there is a risk that trade wars will escalate, sparking further disruptions to global supply chains.
Theme 2: AI-driven boom and productivity
A carryover from 2025, the AI-driven boom, and the resulting increase in productivity and capital expenditure (CAPEX) investment will remain a structural growth driver globally. It will underpin corporate investments and tech infrastructure build-out (growth, development and expansion) of AI this year. The AI capital expenditure cycle in 2025 – which we expect to continue into 2026 – underpinned corporate profit and productivity gains in that sector, making it the biggest shock absorber against prevailing market uncertainty.
Included in this theme are the labour market disruptions which will result from AI and the increased regulatory scrutiny that will come to the fore in 2026. US productivity also falls under this theme. While productivity is not solely an AI issue, when you compare US productivity to that of the European Union (EU) and Japan for example, AI has considerably increased US productivity and underpinned CAPEX spend, giving the US a competitive edge.
Theme 3: The energy transition and competition for resources
Energy security is another enduring theme from 2025. Last year we saw a commodity run, and while there were different contributing factors – like uncertainty over the dollar – it was mostly linked to the global energy transition from fossil fuels to clean energy, including demand for electric vehicles. This transition will keep commodity prices strong throughout 2026, as demand for copper, lutetium, and uranium will continue to increase, having a direct impact on the commodity markets.
In addition, we are seeing a race between China and the US over rare earth elements, and this will continue throughout the year, possibly impacting how global trade and trade wars play out. While the momentum for renewables grows, President Trump will still continue to be pro-oil and this will impact metals, like platinum – used in combustion engines – and oil prices.
Theme 4: Geopolitical multi-polarity
Linked to economic fragmentation, this theme centres around rival economic blocs like the G7 versus BRICS, or the US versus Europe versus China. These dynamics, also observed in 2025, will keep shaping trade, as well as security dynamics around the globe into 2026, adding to policy uncertainty and elevating market volatility. In 2025 we saw instability and riots especially in Europe – most notably in France. In late 2025, French President, Emmanuel Macron, visited China and, warning of the associated risks, said the world is witnessing the beginning of the disintegration of the current international order. This suggests that the global economy is in for another tough year politically, even more so than 2025, as markets now focus on global politics and economies seek to develop alternative trading relationships.
Last year, Europe developed the Europe Weimar Plus (Weimar+) which is an expanded group of major European countries (France, Germany, Poland, United Kingdom, Italy and Spain) which is aimed at boosting European strategic autonomy. Concurrently, the US continues in “isolation mode” under the MAGA banner, which has resulted in a number of “America First” policies which are compounding the world’s current challenges. In 2026 we can expect intense rivalries around resource competition, which will add to the redefining of global alliances.
What will impact how the US fits into the global framework is the November 2026 mid-term election. This takes place two years into President Trump’s second term. With his popularity dwindling on the back of increased costs of living, the longest US government shutdown in history that resulted in a large number of federal workers losing their jobs, and the fact that he didn’t consult the government before attacking Iran or Venezuela, we believe President Trump’s “red sweep” will be tested. The US’s protracted government shutdown despite Trump’s red sweep, also indicates that there is no longer consensus within the Republican Party. These elections are therefore likely to see a shift in the US power balance.
History shows us that anytime there has been a strong sweep, red or blue, when the mid-term elections come around, that sweep has been diluted. That subsequently dilutes the power of the US president who then cannot execute policies with the same support enjoyed in their first two years of power. This is concerning, as President Trump has shown a disregard for established norms and is likely to continue acting unilaterally. Such behaviour risks heightening tensions within the United States and escalating geopolitical pressures globally.
Theme 5: US Federal Reserve independence and the dollar’s reserve status
The independence of the US Federal Reserve (Fed) will come under pressure. The Fed is arguably the “global central bank”, as it determines US monetary policy, which affects the dollar – the reserve currency for the bulk of global trade. The Fed facing political interference from Trump could result in increased volatility in interest rates and currencies, which is something that we, at Citadel, will continue to monitor.
Jerome Powell’s term as Chair of the US Federal Reserve concludes in May 2026. While discussions around his successor have intensified, President Trump has indicated that he has already identified a nominee. Markets are increasingly speculating that Trump may appoint a close ally, raising concerns about the Fed’s independence. Such an appointment could accelerate monetary easing beyond what economic conditions warrant, potentially leading to premature interest rate cuts. This, in turn, could fuel market volatility as investors react to a faster-than-expected shift in US monetary policy. CAM and the global markets will be watching this development closely.
Theme 6: Debt sustainability
Concerns around sovereign debt sustainability, which was already on the cards in 2025, will become more of an issue in 2026. This theme will become particularly relevant in the US since it did not achieve the federal savings it hoped for from the Department of Government Expenditure (DOGE) cleanup exercise. US debt is going to be put under pressure because President Trump’s Big Beautiful Tax Bill, which was to be partially funded by DOGE savings, is going to cost the US government a lot of money, meaning US borrowing will continue to increase. This, however, is not only a US issue. Across the world, government debt is increasing, and the debt servicing costs and the resulting fiscal fragility will challenge both advanced and emerging market economies, including South Africa.
Theme 7: Concentration of equity markets in US
The concentration of equity markets in the US is becoming an issue. Over 75% of listed companies are located in the US. Of these companies, the Magnificent Seven (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) make up around 35% of US equity market capitalisation, and this number is growing. This tech dominance is going to face some scrutiny in 2026. CAM will keep a close eye on this trend, along with the interconnectedness of these companies, something we believe presents some risk because if one falters, it will ripple through the tech sector and global markets as a whole.
Theme 8: South Africa: Reform Green Shoots: Can Momentum Hold?
This year will reveal whether the current green shoots can mature into sustained economic momentum. The Government of National Unity (GNU) appears to be more stable after a rocky start, and is in a better position to balance fiscal strains with the structural reforms that it is driving. This could be the catalyst that unlocks a cycle of growth, which will hopefully restore investor confidence and improve South Africa’s global relationships. However, in 2026, the GNU may face political challenges as the ANC weakens, which may make it more difficult for the GNU to deliver on its agenda.
The GNU was bolstered in 2025 by the South African economy being boosted by massive tailwinds like the commodity boom. These tailwinds can quickly shift into headwinds, so we must avoid becoming complacent or assuming that everything is firmly on track. Also worth noting is that while it is crucial for South Africa to develop stronger relationships with new trading partners to unlock investment and growth, it is also important for the country to fix its relationship with the US if it wants to maintain a favourable trading relationship with one of its largest trading partners.
A brief global outlook
The US: more resilient than anticipated
By the end of 2025, it was confirmed that the US economy is more resilient than markets anticipated at the start of the year. This resilience was aided by the US evolving into a tech economy. Where typically, the US used to rely on the US consumer for economic growth, US GDP is now further supported by the massive CAPEX spend by AI-related companies, a trend that shows no signs of abating. So, the US will probably continue to slow towards capacity growth of around 2% for at least the next three years. Given its recent growth north of 3%, slowing down to 2% is not a calamity and presents a healthy growth environment.
The US, however, is facing some challenges. Its job market is under pressure, US inflation remains above target, and the question of central bank independence is a cause for concern. The Fed will probably want to cut rates given the softness in the labour market, but not too fast, as US inflation remains sticky and is sitting above the Fed’s target. It is for this reason that if the wrong person succeeds Jerome Powell as Fed Chair, and interest rates are cut too quickly, this could result in the US economy overheating, potentially causing a recession.
Europe, including the UK: ageing populations and low productivity hurting growth
Looking at Europe, including the United Kingdom (UK), we see that the region had a good pickup in economic growth in 2025, largely on the back of the increased fiscal spend to meet the North Atlantic Treaty Organisation’s (NATO’s) defence targets. However, this growth is not sustainable as it is a ‘once-off’ spend on what is termed non-productive investments, unlike productive investments like the building of infrastructure of roads and factories.
Europe is not benefitting from the technology boom as it is significantly behind the US in its AI CAPEX. In addition, the region lags the US in terms of productivity. When it comes to manufacturing, Europe is not only being hurt by US tariffs, the region is suffering under more competitive Chinese imports, especially electric vehicles, that are much more affordable than their European equivalents. As a result, we’re seeing a sharp decline in European export sales, as even Chinese consumers are increasingly opting for more affordable local alternatives.
Europe is also dealing with an aging population, increased populism due to its large immigrant population, and social unrest which is further hurting regional economies. What’s more, they are still dealing with excessive energy prices as the Russia-Ukraine war rages unabated on their doorstep.
Despite the rebound in European growth in 2025, given the challenges listed above, we believe that the region will battle to achieve anything above 1.5%, which is a significant discount to the US’s growth of 2%.
China: consumers are not spending at capacity
China is also experiencing structural issues. The country has an aging population, and it is stuck with a situation of more supply than demand, given strong manufacturing outputs. This has resulted in deflation, and the country is struggling to get consumer consumption up.
The reason for this lacklustre consumer consumption is that Chinese families living in urban areas have traditionally put their wealth into property. Many of these families own at least two properties because they lack confidence that the Chinese government will refrain from intervening in the private sector or over‑regulating equities in ways that disadvantage minority shareholders. With most of consumer wealth sitting in property, the country is seeing an overcapacity of property which has resulted in property prices declining, meaning these investments are now in negative territory. When the wealth impact is negative, people feel less wealthy, which puts pressure on consumer confidence and as a result, people reduce spending aggressively. It is for this reason that China is seeing pressure on private consumption.
To counter this, the Chinese government is trying to stimulate the economy where it can. This is because if it can get consumption to play a bigger part in the economy, through the buying of goods and services, then China can become a lot less reliant on the global economy, making it more self-sufficient.
Despite consumer consumption being down, Chinese exports are up and are looking healthy, making manufacturing the key driver of the Chinese economy. Interestingly, the Chinese are no longer exporting the bulk of their products to the US, which was previously China’s largest export market. In 2025, exports to the US experienced a double digit decline due to Trump’s tariffs.
We expect China’s growth to level out at about 4% which although lower, is still reasonable given the state of the global economy at this time.
South Africa: cautiously optimistic
While there are signs that the South African economy is improving, the country is still facing the same challenges that it did in 2025. Investment remains a problem and it requires a more business-friendly environment to attract more corporate investments both locally and abroad. If South Africa can improve investment into the economy, it will be able to achieve more sustainable growth. It is for this reason that it is important for the GNU to remain stable so that it can continue to drive that agenda. While it is early days, we are seeing some green shoots.
An example of the positive impact investment and private participation can have is the turnaround in South Africa’s power supply and Eskom. Given this success story, the country needs to look at fixing its other structural issues including the efficiency of its harbours and the total tonnage being transported on rail. While South Africa has turned a corner in this regard and is on an upward cycle, it still finds itself well below levels seen in 2016. It is, however, moving in the right direction, which is a positive sign.
Economic growth for 2025 is expected to be just under 1%. In the latter part of 2024, and in early 2025, local growth stemmed predominantly from agriculture. For a small economy, having growth being driven by a single small sector is not sustainable, even though agriculture is the fastest growing sector in the country, with its contribution now equivalent to mining.
Encouragingly though, the contributors to growth have become more diverse during the latter part of 2025. These included mining, on the back of the commodity tailwind that we have been seeing. Manufacturing and construction also turned positive in the last quarterly print, for the first time in many quarters. This may spur confidence for businesses to invest back into the economy, resulting in a turnaround of gross capital formation (total investment into the country), which is something we always talk about as it will allow South Africa to rebuild capacity.
So our outlook for South Africa is cautiously optimistic. Last year, the local economy was supported by a number of economic dynamics including global factors, the commodity cycle, and progress with infrastructure development programmes. If the economy can continue to deliver, there is a chance that we can slowly start to move above the 1.5% growth that we have been locked into over the past few years and get closer to 2% in the next three years. That reflects Theme 8 for 2026, which is that this is a pivotal – make or break – year for South Africa.
The global economy in summary
In 2026, the CAM outlook, given all the dynamics from the various regions, is that the global economy will experience growth around 2.5%, which is slightly down from 2025 levels and definitely below the average of the last 10 years which stood at around 3.5%. This is because of existing trade friction, along with the change in the global trading landscape where economies transition to new trading partners.
Nevertheless, the AI-driven investment boom will provide a buffer and support the global economy in terms of growth. We believe that growth of around 2.5% is a good number for the world to get through this transition phase.
The CAM strategy
In this environment, CAM will stick to its investment philosophy. There is a lot of misleading and false information in the marketplace, but it is our job to filter out the noise and determine what is sentiment and what is fundamental. We will stick to the Citadel investment strategy with its four investment pillars – The future is uncertain and will surprise, valuations matter, diversification is important, and focus on a financial plan that works for you and the resulting asset allocation – as a guide to take us through a very volatile environment to do the right things at the right time. In addition, our focus will be on mitigating risk in an extremely fragile and volatile world. This will be a core focus for the CAM team in 2026, as we must be able to react quickly to whatever curveballs the markets present.
Looking back at 2025, it’s clear that prevailing themes and underlying fundamentals do not always translate into market outcomes. Equity markets, for example, delivered a notable upside surprise despite what the fundamentals suggested. It is precisely in environments where there is a disconnect between economic signals and market behaviour that we need to remain vigilant. Ultimately, our investment team must navigate carefully to mitigate risks while still positioning to capture available opportunities.
