Expect turbulent asset markets in 2026

The biggest surprise of the past year is not that global asset prices have risen so sharply but that investors have shown so little concern about risk, apart from a brief scare following United States President Donald Trump's “Liberation Day” tariff announcement in April.

- KENNETH ROGOFF

The question now is whether 2026 will break the spell.One might expect that, after three years of extraordinary returns, markets would start worrying about the inevitable crash that follows periods of sustained euphoria. Artificial intelligence (AI) may be full of promise (at least for firms, if not always for workers), but the long history of transformative technologies — from railroads and internal combustion engines to the internet — has been marked by booms and busts. Early entrants often collapse spectacularly, only to be replaced later by second-generation firms that “get it right.” And while a few companies may come to dominate, as IBM once did in computing, that does little to reduce uncertainty, since longevity is never guaranteed.

As investors struggle to assess how AI will affect growth and corporate profits, the odds of a global stock-market crash in the next few years appear uncomfortably high. Does that mean it is time to sell? Not necessarily, as stock prices can continue to rise long after warning signs start flashing red. That is what happened in 1996, when then-Federal Reserve Chair Alan Greenspan — drawing on the work of future Nobel laureate Robert J Shiller — warned of the stock market's “irrational exuberance.” Greenspan and Shiller were ultimately proven right, but their timing was off: The dotcom bubble did not burst until March 2000, after stocks had more than doubled.