Market outlook Investors expect stocks to rise but Trump and AI still pose risks

Investors expect stock markets to keep rising in 2026, despite fears that the AI bubble could burst and anxiety about chaos engulfing America’s central bank.

- Graeme Wearden

Wall Street strategists broadly expect the S&P 500 share index of US-listed companies to continue to rise over the next 12 months, but said it could be a volatile year if geopolitical tensions increase and inflation fails to fall.

Top threats: AI fears, Fed turmoil and private credit

A poll of 440 investors, economists and analysts by Deutsche Bank found that 57% believe a plunge in technology valuations, or waning enthusiasm in AI, is a top risk to market stability in 2026.

The second biggest fear is that Donald Trump appoints a new Federal Reserve chair who pushes for aggressive cuts to interest rates, causing market turmoil.

The US president said on 17 December he would name the next Fed chair soon and that it would be someone who believes in lower interest rates “by a lot”.

The third was a crisis in the private capital market - such as those within private equity, venture capital and private debt.

Will the UK stock market keep rising?

After a bumper 2025 for the UK stock market and the FTSE 100 blue-chip index crossing the 10,000-point threshold for the first time yesterday, analysts and retail investors are confident of more gains in 2026.

AJ Bell investment director Russ Mould said the omens were quite good, with analysts forecasting 14% profit growth from the FTSE 100 in 2026. Total FTSE 100 dividend payments are expected to set a new record of £85.6bn this year, Mould reported, finally eclipsing the peak of £85.2bn set in 2018.

UK bonds could do well

It could be a strong year for UK government bonds, known as gilts, if the Bank of England cuts interest rates more rapidly than other central banks.

Robert Timper, the chief global fixed income strategist at BCA Research, said: “UK gilts will go from second to the best-performing bond market [in 2026], backed by a dovish BoE and reduced fiscal concerns.”

Global markets forecast to rise