The world remains in an environment of poor growth, high debt and financial repression, with a continuing monetary tsunami that inflates nominal valuations and forces investors to stay selectively focused on structural winners.
To protect themselves against monetary inflation, investors should continue to invest in equities, as multiples are compelling when looking beyond the “magnificent seven” technology names.
Gold and silver, as well as bitcoin if you accept the volatility, will likely offset the negative real returns of sovereign debt.
A world of weak growth and excess debt
Global growth in 2026 is expected to be weak but positive, clearly above recession territory due to big unproductive government spending programmes but insufficient to generate solid productivity gains, absorb accumulated public debt, or comfortably finance future spending commitments.
Global GDP is projected to grow around 3.0–3.1% in 2026, broadly in line with 2025 and well below pre-2008 averages.
Most developed nations will likely remain in a private sector recession, while the US leads in investment growth and manufacturing improvement
The United States will likely lead developed markets with 2.1% growth, while the euro area, Japan, the UK, and Canada will likely continue to stagnate.
In fact, most developed nations will likely remain in a private sector recession, while the US leads in investment growth and manufacturing improvement.
China and India, at 5% and 6%, are likely to lead the momentum in emerging economies, while LatAm lags with slightly above‑1.5% growth except for Argentina, which is expected to grow above 4%.
Monetary policy, inflation and fiscal stress
Global money supply growth will probably rise significantly above nominal GDP, at least by 12%.
The monetary “tsunami” reflects years of aggressive monetary and fiscal expansion, persistent fiscal deficits, and bloated public balance sheets that still dominate central banks and government policies.
Behind the official debt figures lies a much larger iceberg of unfunded entitlements and implicit promises, exceeding 100% of GDP in the US and more than 400% in France or Germany, which limits inflation control and shows a structurally low‑growth backdrop.
In 2026, the Federal Reserve will remain accommodative, lowering real rates to the neutral level after admitting that tariffs did not cause the feared inflation to burst.
I still expect broad money in the US, Europe, and globally to grow faster than nominal GDP, supporting higher nominal asset prices.
The possibility of a small quantitative easing programme of $20 billion per month or a hidden easing plan to boost liquidity is very likely as well.
Given the political and fiscal fragility in member states such as France, the European Central Bank must remain accommodative.
Ongoing inflation along with low interest rates and lots of money available will probably impact how much people spend and invest
I expect them to continue with “hidden QE” measures like the anti-fragmentation tool and the monetisation of part of the Re-Arm and Next Generation funds.
While headline inflation globally shows a declining trend, the risk of persistent price inflation remains, and global CPI figures are expected to remain significantly larger than what they should be due to the elevated government spending figures.
Global inflation is expected to continue moderating in 2026 but remain above pre-pandemic levels, at 3%, with developed economies above their 2% target, when CPI should be significantly lower if governments did not continue expanding their budgets and deficits.
Ongoing inflation along with low interest rates and lots of money available will probably impact how much people spend and invest, but it will likely increase the prices of hard assets and equities.
On the fiscal side, the combination of high debt and uncontrolled primary spending is especially concerning in France, Japan, and the United Kingdom, where public finances are clearly deteriorating.
Large deficits in Canada, France, Germany, the UK and Japan compare with some improvements in the US, where tax cuts and deregulation reinforce a relatively more attractive combination of growth and spending cuts.
This is the main reason why we may see another poor year for sovereign debt with real negative returns, as investors lose confidence in the solvency of major public issuers.
Geopolitics, fragmentation and currencies
Geopolitical risk looks slightly lower than in previous years, but tensions in Ukraine and Venezuela, as well as political strain in France and uncertainty in Germany, continue to fragment the European landscape.
Globally, the financial decoupling between China and the United States will keep affecting demand for developed‑market sovereign bonds and support the renewed role of gold as a reserve asset.
In the currency market, the US dollar, which was heavily shorted in 2025, may reverse its trend and strengthen.
Weak growth, insane government spending, monetary expansion, and heavy public debt are driving inflationary pressure on assets and reducing potential economic growth - Daniel Lacalle
The DXY US dollar index closes 2025 above its 20‑year average and has held a stabilisation trend since June, helped by better-than-expected growth and deficit reduction.
The US dollar tends to strengthen for seven years after a year of weakness and continues to act as the global reserve fiat currency in a world of weakening state-issued currencies.
However, gold continues to be the preferred asset for many global central banks as all fiat currencies lose purchasing power.
Poor growth and a monetary tsunami mean that valuations and solid large-cap earnings will likely continue to support investment, without ignoring volatility and growing dispersion between winners and losers.
The strategy remains to stay with the winners, avoid sovereign debt, and use gold, silver and Bitcoin, volatility adjusted, to defend ourselves against the monetary inflation ahead.
Gold and silver, together with bitcoin—acknowledging its volatility—will continue to act as beneficial hedges against the erosion of fiat currencies’ purchasing power.
Central bank demand supports gold; industrial and technological uses support silver; and the search for a decentralised, non-sovereign asset may drive higher demand for bitcoin.
Geopolitical risk, persistent inflation, poor productivity and manufacturing growth, the end of sovereign debt as a reserve asset, fiscal challenges in developed nations, and the destruction of the middle class through monetary inflation remain the biggest concerns for investors.
The next year looks a lot like 2025. Weak growth, insane government spending, monetary expansion, and heavy public debt are driving inflationary pressure on assets and reducing potential economic growth.
The most important lesson: the only way to defend yourself against the irreversible decline of fiat money is to invest.
