Global stocks to edge higher in 2026 but lag this year’s strong run

BENGALURU – Most major global stock indexes should trade higher by the end of 2026 but will struggle to repeat this year’s surprisingly strong performance, according to a Reuters poll of equity strategists, with over half expecting a correction in the coming months.

In April when the White House suddenly imposed sweeping tariffs not seen since the 1930s, the move sent the benchmark US S&P 500 tumbling over 10%. Since then the index has recovered all of its losses and is up around 40% with tech and artificial intelligence stocks leading the charge.

But, as many of those trade restrictions remain in place, there are plenty of risks ahead for the global economy and, by extension, stock markets, particularly of a potential sell-off in AI shares that could spill into broader market sentiment.

A 56% majority of analysts, 49 of 87, in the November 13-25 poll said a correction in most of the 15 global stock indexes surveyed was likely or very likely, while 38 participants said it was unlikely, including six that viewed such an event as very unlikely.

Back at the start of the year, a slightly smaller majority of analysts had expected a correction to hit stock prices in three months.

“This year’s strong gains will be difficult to replicate … This suggests slower returns and potentially higher volatility in 2026,” said Angelo Kourkafas, senior global investment strategist at Edward Jones.

Twelve of 15 global stock indexes surveyed will post fewer gains in 2026 than they have so far this year, poll medians showed.

Although India’s BSE, NSE, and France’s CAC 40 were expected to notch slightly higher gains over the next 12 months, the projected outperformance was just a modest 1% or less.

Meanwhile, fueled by gains in technology stocks – and especially AI-related companies – the S&P 500, which is up 14% for this year, will rise 11.7% from its current levels to 7,490 by the end of 2026, the sample’s median estimate showed.

However, lofty technology valuations and an exuberance over the AI trade are pressuring stocks as market valuations approach their highest since the dot-com bubble 25 years ago, according to LSEG Datastream.

“Investors appear to have grown complacent – after all, things have gone well so far. But this is precisely where the danger lies for markets. Ignoring risks doesn’t make them disappear,” said Berndt Fernow, deputy director at LBBW.

“From an investor’s perspective, another source of concern is the unprecedented concentration of market capitalization in just a few AI-driven companies.”

An improving economic environment, combined with still low valuations relative to the US, is expected to help European shares repeat this year’s strong gains in 2026.

The pan-European STOXX 600 index is expected to rise to 623 points by the end of 2026, gaining around 11%. The index has rallied 10.9% this year.

“We currently see a more favorable situation in Europe than the US, primarily due to lower concentration risks. Unlike the US, where relatively few mega-cap stocks dominate the main indices, Europe currently offers a broader and more diversified set of investment opportunities,” said Michael Heldmann, chief investment officer, systematic equity at Allianz Global Investors.

In Asia, Japan’s Nikkei, which has had a stellar run with the index gaining nearly 22% in 2025, is expected to rise 13% in 2026 on strong corporate earnings and economic growth driven by Prime Minister Sanae Takaichi’s government stimulus.

India’s benchmark BSE Sensex is predicted to rise 9% from current levels to reach a record high of 92,400 by the end of 2026 on strong domestic investor demand.

Canada’s main stock index was forecast to gain about 5% to reach another all-time high next year, but that would be well short of this year’s near 24% rise.

(Reporting by Hari Kishan; additional reporting and polling by correspondents in Bengaluru, Buenos Aires, London, Mexico City, Milan, New York, San Francisco, Sao Paulo, Tokyo, and Toronto; editing by Mark Heinrich)