Global Stock Market Outlook for the First Half of 2026: Returns, Risks, and the Road Ahead for Investors

Global Stock Market Outlook for the First Half of 2026: Returns, Risks, and the Road Ahead for Investors

If you’re trying to map the first half of 2026, the cleanest way to think about global stocks is as a tug-of-war between easing (or at least less-restrictive) monetary policy and still-decent earnings growth on one side, and policy/geopolitical shocks plus “hot” equity valuations on the other. Most mainstream outlooks coming into January 2026 lean constructive on returns, but they also sound unusually explicit about the path being choppier than the destination—because the market is still priced for a lot of good news, and leadership is still concentrated in a relatively small set of themes and mega-caps.

Start with the macro “weather report,” because it sets the ceiling and the floor for risk assets. The UN’s January 2026 baseline is a world economy that grows around 2.7% in 2026 (slightly slower than 2025), with tariffs/trade friction and geopolitics acting as recurring headwinds rather than a one-off storm. The IMF’s latest full WEO (October 2025) penciled in 3.1% global growth for 2026, with advanced economies around the mid-1% range and emerging markets a bit above 4%—not boom conditions, but also not a recession call. Layer on top the “rates story”: several major houses argue the world is moving from “tightening as the main plot” to “normalization as the backdrop,” which historically supports equity multiples if earnings don’t crack.

So what does that imply for returns in H1 2026? A practical way to interpret the big-bank and big-house forecasts is as an annual total-return “gravity” in the high single digits to low teens for global equities, with meaningful dispersion by region. Goldman Sachs Research, for instance, has recently framed global stocks as capable of about ~11% total return over the next 12 months (USD, including dividends)—that’s not a promise, but it’s a clear statement of a positive base case. In the U.S., Goldman has also published a view that the S&P 500 could rise about ~12% in 2026, supported by healthy growth and Fed easing, even while acknowledging rich valuations and concentration. Other strategists are in the same ballpark: Morgan Stanley’s published target around 7,800 (framed as roughly low-teens upside from where it was discussed), and Oppenheimer has floated a year-end target around 8,100 built off an earnings-and-multiple framework.

Translating those annual calls into a first-half expectation, a reasonable “base-case envelope” many investors will implicitly carry is something like mid-single-digit gains by late June 2026 for broad developed-market equities (say ~+3% to +8% total return), with a decent chance of at least one drawdown scare along the way (for example, a quick -7% to -12% pullback) if policy headlines or rates reprice abruptly. That range isn’t a formal forecast from any single institution—it’s a way to reconcile upbeat year targets with the reality that the path is rarely smooth when valuations are elevated and macro uncertainty is high. The “why now?” is visible in several outlooks: concentrated leadership (meaning diversification doesn’t always feel like diversification day-to-day) and markets that can swing quickly when a single dominant factor is driving returns.

Where the return potential looks most interesting—and where the risks hide—depends heavily on whether 2026 becomes a “broadening” year. Many outlooks argue that the AI investment cycle remains a genuine earnings engine, but that leadership should gradually spread beyond the most crowded names as adoption moves from infrastructure into normal business lines. MSCI has pointed to very strong projected 2026 earnings growth inside parts of the AI value chain (its research basket shows projected growth north of 20%), which helps explain why the theme can keep pulling capital even when valuations look stretched. The flip side is that the market is now extremely sensitive to any sign that AI capex is outrunning monetization—because when “narrative” spending disappoints, the de-rating can be fast.

Internationally, there’s a second narrative that matters for H1: relative valuations plus currency. After 2025’s pattern of non-U.S. outperformance (helped by a weaker dollar and cheaper starting valuations), several commentators expect global investors to keep testing the diversification trade into 2026 rather than reflexively crowding back into the U.S. If the dollar stays soft or range-bound, that can mechanically lift USD-based returns from overseas equities; if the dollar snaps back, it can erase local-market gains for foreign holdings. That currency hinge is one of the most underappreciated “return drivers” for the first half because it can dominate fundamentals over three-to-six month windows.

Emerging markets are the most two-handed part of the outlook: the upside case is compelling (cheaper valuations versus developed markets, room for idiosyncratic winners, and potential support if the dollar weakens), but the tail risks are real and varied by country. Goldman has recently discussed a constructive EM view into 2026 (their commentary has referenced mid-teens total-return potential over a year horizon in at least one piece), and other managers emphasize the valuation cushion versus developed markets. Franklin Templeton’s own materials, meanwhile, are blunt about the China/Hong Kong/Taiwan risk stack—policy, liquidity, capital controls, and geopolitics—reminding you that “cheap” can stay cheap when the risk premium rises. For H1 2026 specifically, the EM return spread is likely to be wide: in a calm-rates / softer-dollar tape, EM can lead; in a shock-rates / stronger-dollar tape, it can lag quickly.

Bonds matter here not because you asked about them directly, but because the first half of 2026 may be the period when investors decide whether the rate-cut cycle is “ongoing support” or “nearly done.” Some outlooks suggest policy rates may approach a trough in H1 2026, after which additional cuts are less certain. If that’s right, duration (longer-maturity bonds) can still help ballast portfolios early in the year, but the bigger story becomes carry (earning yield) rather than price appreciation—unless growth deteriorates more sharply than expected. The equity implication is subtle: if the market starts to believe cuts are ending because growth is fine, equities usually like that; if it believes cuts are ending because inflation is sticky, equities can struggle as real yields stay high.

Now the part investors usually underestimate: the risk factors that can turn a “base-case +5%” half-year into a flat or negative one. In early 2026, the most repeatable shock source is still policy. The UN has explicitly tied part of its 2026 outlook to the lingering effects of higher U.S. tariffs and trade tensions—meaning headlines can become macro. The second is valuation + concentration risk: when a small set of names or a single factor explains a big share of index movement, the market becomes more fragile to crowded positioning and sudden de-risking. BlackRock has highlighted how concentrated equity returns have become and argued the environment calls for genuinely idiosyncratic sources of return, not just “more of the same beta.” The third is the AI capex payoff question—less “is AI real?” and more “are the trillions in investment earning their cost of capital quickly enough?” Even relatively constructive EM commentary flags the possibility that global benchmarks are vulnerable if AI spending doesn’t translate into adequate returns.

Then there are the classic “slow-burn” risks that don’t always show up in a single headline but can matter a lot over six months: an inflation re-acceleration that forces central banks to pause earlier than markets expect; an earnings disappointment that turns optimistic forward estimates into downgrades; refinancing stress in pockets of credit; and geopolitical escalation that directly affects energy prices or shipping routes. And there’s one risk that is uniquely important precisely because many forecasts are optimistic: when consensus expects new highs, the bar for “good news” rises, and the market can sell off on merely “less great” data.

So what should an investor expect to feel in H1 2026 if the base case holds? Probably something like this: January-to-March is dominated by macro repricing (rates, dollar, policy headlines) plus early-year earnings guidance; April-to-June is dominated by whether earnings breadth improves and whether leadership broadens beyond the most crowded themes. If the broadening story works, the most plausible way returns show up is not a straight line up in the index, but rotating strength—periods where cyclicals, financials, or non-U.S. markets take the baton while mega-cap tech consolidates. If the broadening story fails, you tend to get the opposite: index resilience masking weak internals, followed by sharper air pockets when concentration breaks.

If you want a single sentence “return forecast” that’s faithful to the major outlooks but honest about uncertainty: global equities in H1 2026 are more likely than not to be positive, with mid-single-digit total returns a sensible base case, but with a higher-than-normal probability of sharp, policy-driven drawdowns that can temporarily swamp fundamentals.