Key points:
- Global GDP growth in 2025 likely ended slightly above 3 percent. One Big Beautiful Bill and tax cuts will help keep US growth around 2 percent in 2026.
- The military operation in Venezuela, given the country’s oil reserves, created uncertainty in the oil market, but market movements have so far been limited.
- Over the longer term, however, the geopolitical situation in the Western Hemisphere may shift more in the direction of the Monroe Doctrine.
Global GDP growth in 2025 likely ended slightly above 3 percent, which is almost the same pace as in 2024. GDP growth in advanced economies slowed from 1.8 percent in 2024 to an estimated 1.6 percent in 2025, with growth in the United States in particular declining from 2.8 percent to an expected 2.1 percent in 2025. Growth in the euro area, by contrast, increased from 0.9 percent to an expected 1.4 percent in 2025. GDP growth in emerging economies in 2025 likely ended slightly above 4 percent, also roughly the same pace as in 2024. Growth in China likely ended around 4.9 percent in 2025.
Looking ahead to 2026, global growth expectations are roughly at the same level as last year, while inflation is expected to decline further. In the United States, expected GDP growth in 2026 is 2 percent, where the tax cuts in Trump’s One Big Beautiful Bill (OBBB) will provide growth impulses of around 0.5-1 percentage points. The tax cuts, which take effect from the beginning of the year, apply to both businesses and households. This will offset some of the negative effects from the tariff war, which has reduced households’ purchasing power.
Venezuela and Its Oil Reserves
During the first days of the year, the Trump administration also carried out a military operation in Venezuela, in which President Nicolás Maduro was abducted and transported to the United States to stand trial there. Although the size of Venezuela’s GDP is comparable to that of a smaller European state such as Luxembourg or Croatia, the country is estimated to hold the largest oil reserves in the world - larger than both Saudi Arabia and Iran, and estimated to be about three times larger than the oil reserves of the United States itself.
The type of oil Venezuela holds also differs from that found in the United States. The immediate market reaction was muted, with oil prices in particular falling somewhat. Although Venezuela has large reserves, its production is much smaller in the global context. Over the longer term, however, the military action may indicate a clearer shift in the geopolitical situation under Trump - a shift in which national security is increasingly used as justification for intervention in various contexts, despite being in conflict with, for example, international law and the law of nations.
The Monroe Doctrine
At the press conference following the military operation, Trump mentioned the so-called Monroe Doctrine several times, as he has done on many previous occasions. The Monroe Doctrine is one of the most well-known and long-standing principles of US foreign policy and was formulated by President James Monroe in 1823. The doctrine was later expanded (including the Roosevelt Corollary in 1904) and has been used as justification for US influence in the Western Hemisphere and for interventions, particularly in Latin America.
Geopolitically, this may mean that the United States under Trump increasingly seeks control over its own neighbourhood and the Western Hemisphere. This likely also affects Trump’s view of Greenland (and Canada) from a geographical standpoint, where security policy considerations are increasingly used as justification and argument.
Global Equities – Neutral Weight
Global equities, measured by the MSCI World in local currency, rose 18 percent in 2025. This marks the third consecutive year of double-digit returns. Technology and financial stocks performed particularly well in 2025, while consumer stocks lagged. Regionally, European equities outperformed U.S. equities, especially when accounting for currency effects.
Global growth momentum appears to remain strong going into 2026, helped significantly by OBBB. The US Federal Reserve (Fed) also appears set to continue cutting interest rates. We remain neutral-weighted in global equities but have slightly increased exposure heading into 2026.
Emerging Markets (EM) – Overweight
Equity markets in emerging economies, measured in local currency, rose by as much as 31 percent in 2025 - clearly more than in advanced economies, even in a common currency. Among the major markets, South Korea rose the most and India the least. The largest market, China, also rose sharply.
Trade wars and tariffs were in focus, especially between the United States and China. Growth in China also ended higher than expected at the start of 2025, due to stimulus measures and a redirection of exports to countries other than the United States. We remain overweight in emerging markets.
Global Bonds – Neutral Weight
Global government bonds (JPM GBI) rose by nearly 3 percent in 2025, marking the third consecutive year of gains. However, regional dispersion was large: returns were highest in the United States and the United Kingdom, while clearly negative in Japan. Returns in Germany and the euro area were also negative.
The Fed resumed rate cuts after a pause, while the ECB continued cutting before ultimately pausing at a lower interest-rate level. We remain neutral-weighted in duration and global government bonds.