Monthly house view | March 2026
Context
Global growth remains strong and is accelerating in the US, Europe and Japan. In the US, tax cuts from the One Big Beautiful Bill are starting to kick in. Later this year, Kevin Warsh, the nominee to lead the Federal Reserve, is likely to cut interest rates. This should support US growth.
Meanwhile, the German defence industry is handling significant orders for military equipment, which should fuel Europe’s growth engine. In Japan, a decisive election win provides a mandate for Prime Minister Sanae Takaichi’s pro-growth strategy. Collectively, these developments reinforce a growth trend that is broadening across major economies.
AI disruption
However, a series of important risks have emerged.
- America’s AI productivity “miracle” is boosting corporate margins but unsettling labour markets. The rapid adoption of advanced AI tools is also disrupting, asset-light industries, such as software. In this respect, AI could be both a gift and a curse that may compel investors to reassess their portfolio allocations.
- Most G-7 nations have high public debt levels that either match or exceed their annual economic output. This environment is fuelling concerns about long-term debt sustainability in the developed world.
- Fiscal dominance is accelerating as G-7 governments pursue expansive spending agendas. This concerted fiscal impulse will only increase the West’s growing debt piles.
- Geopolitical tensions are rising. Recent developments in the Middle East, Greenland, Venezuela, Ukraine and Asia are destabilising markets.
Taken together, these factors are contributing to a so-called debasement trade, whereby investors retreat from the US dollar and typical safe-haven assets like US Treasuries.
