Patrick
Hi there, and welcome back to the Barclays Brief podcast and Happy New Year. It's our first episode of 2026, and we're kicking things off with a guest who always brings sharp insights and big picture thinking. Ajay Rajadhyaksha our Global Chairman of Research here at Barclays. Ajay, thanks a lot for joining the podcast today. 

Ajay 
Very good to be back on the Barclays Brief, Patrick.

Patrick
Right. So last time you joined us we unpacked why the gold price was flying up. Today, I want to zoom out a bit to the bigger picture. You know, what does 2026 look like for markets? Where are the opportunities and where are the biggest risks that investors need to watch out for?

So, let's get going Ajay big picture. Your 2026 outlook was titled "No Turning Back”. What did you mean by that? And what are the key themes that will define markets in 2026?

Ajay 
It's funny you should mention key themes back. Look, because a year ago, two years ago, I would have given you an answer that was very macro focused.

I would have talked about labor markets, central bank policy, where inflation was headed. Unfortunately, there's not that much to talk about in any of those areas. At this point, the only thing that matters to the US and to the global economy is where the AI narrative is headed. And there's a couple of reasons for that. The first is obviously the extent to which AI has driven growth, especially in the United States, but not only in the US.

Now, I know there's been a lot of focus on AI CapEx, but that's not the only part of the story. The fact is that the US consumer, the single most important global economic force, has held up better than expected in 2025, even with a tariff war, even with weak job creation, even with a low savings rate.

And the reason is because equity wealth has kept rising, and the equities that have kept rising are obviously AI-sensitive equities. So, AI CapEx has supported business investment, but AI equities have supported consumption. The rest of the economy is actually surprisingly weak. So, you know, even though this is going to be the second straight year where all you are going to hear people talk about is AI.

The fact is that as an economy, both for the US and for the world economy, we are basically going to live and die by what happens to the AI narrative. That is what I mean when I say there is no turning back. And you will notice the one country that I did not mention at all, Patrick, even though it is a topical issue right now, is Venezuela. It is an important story locally. When I zoom out, though, for global macro economies, there's not much to say.

Patrick
Understood. So, you said the AI is going to be the dominant macro force in 2026, but what about all the other things you used to talk about those traditional drivers, whether it's trade policy or central banks? What is the framework you're using to assess them in 2026, Ajay?

Ajay 
Oh, it's a good question. Let's start with trade. The one big assumption we are using here is that even if the US Supreme Court strikes down IEEPA tariffs, the United States will still get to the same place using sectoral tariffs. The Supreme Court decision should come, could come any day now and even if it goes against the administration, it is not a macro game changer. I'll also point out, Patrick, that on the inflation front, there was a lot of noise, a lot of worry about goods inflation pushing up overall inflation because of tariffs. And honestly, it's been misplaced every single month that you get an inflation print which doesn't blow the roof off. I worry less about goods inflation. This is a story that continues to fade. And I think for 2026 we'll probably still talk about that tariff headline, but it's not going to play as much of a role as it did in 2025.

Patrick
Talk to me about the independence of the fed. Now that was questioned repeatedly last year. Is that a genuine risk to markets or is it more noise and beyond the fed, what’s on your radar when it comes to global central banks?

Ajay 
I think the bond market has been remarkably sanguine about fed independence. So, I'll give you an example. The day that Governor Lisa Cook in mid-August was let go, long end inflation break evens should have widened if the market genuinely was worried about her credibility about fed independence. Instead, they fell slightly. Collectively, bond investors seem to be saying, look, we are the final arbiters. Just for argument's sake, if every single fed member is replaced by a dovish voter, and if this new fed puts monetary policy at super low levels not justified by economics, guess what happens? Inflation takes off as a result long and yields take off. And those are the parts of the yield curve that matter to the US economy. No administration wants that. I just don't think this is going to be something that poses a major risk.

Now, you ask me about other central banks. Well, the ECB is done. They are on hold, we think for all of 2026 since they got to their levels, inflation in the Euro area is in a much better state than in the United States. Really the only central bank to watch at this point of the major ones is probably the Bank of Japan. They are still arguably behind the curve when it comes to inflation. They still have room to go. Their mindset has always been to go very, very gently and long end Japanese yields have, from time to time expressed discomfort with that. So, from a central bank standpoint, I would argue that even the fed is going to be a little bit of a backseat story to what happens in Japan. That I think is the one traditional macro indicator to keep watching.

Patrick
Okay. What else in terms of risks Ajay? You know, what could go wrong? Because we've got high valuations. We've got massive capital needs for the AI cycle, a two-speed economy arguably, and retail investors heavily into equities,

Ajay 
Well, you went through a pretty good laundry list, Patrick, but if I had to pick one, it is the long end of global bond curves. So, they are interconnected. You know, what happens in Ōtemachi does affect what happens in New York and vice versa. And across the Western world and I'm including Japan here, Japan, the United States, the United Kingdom, France in particular. These are all countries with large debt loads. Where fiscal profiles continue to worsen, governments have shown little political will to do anything about it. And one big risk to keep in mind, again, it is not a risk that we think will be realized because we do think there are some levers still left to pull. But one big risk to keep in mind for ‘26 is if bond markets basically start to rebel. If they say that there is so much supply coming down the pike that this, this it, we've had enough and long ends start to get unanchored again, if it happens, it's a very big deal. Now, away from that, I think one risk perhaps not on investors radar as much as it should be, is whether the traditional moat of Nvidia chip design, of TSMC's chip manufacturing, and ASML lithographic machines that are part of that ecosystem. 

Whether that gets seriously challenged, because this is the moat on the back of which the Apples on the Googles and the metals of the world essentially run these massive profit engines. And if you have another part of the world and China is the obvious place to look at, where this dominance starts to get challenged seriously; well, then I think equities will have to rethink everything. And you mentioned a lot of debt being raised on the data center front. Of course, that is something that is front and center. You will notice the last two months of last year, Patrick, the AI theme took a little bit of a wobble, right? Investors were not blindly buying every AI name. They started to differentiate between those that they felt, worried about servicing debt loads versus those that seemed fine. The equity market is starting to pick winners and losers, which is fine. But if you start to get to a point where they start to worry about debt sustainability, well then that becomes the much, much bigger deal. These are all risks. These are not our baseline; our baseline still remains that you're supposed to be in a pretty positive frame of mind entering 2026.

Patrick
Understood. We will no doubt be digging into those risks on the Barclays Brief during the course of 2026. But put it all together for us, Ajay – how should investors be positioned? 

Ajay 
A couple of bullet points here. US exceptionalism is intact, number one. And number two is big tech exceptionalism – and the two are obviously related – is intact. So, we think global equities outperform global fixed income for yet another quarter, a view that we've had for about two and a half years now. We think U.S. equities do better than their counterparts across the Atlantic. And then zooming in, we think that the big 6, big 7 do better than the S&P 493. These profit engines are so astonishing. Big tech is the miracle that keeps on giving. Now I will acknowledge that US equities did underperform a bunch of markets in 2025. But the fact is that US equities have done so much better than most other markets that we think this was a little bit of a catch up. I would be remiss if I didn't talk about the dollar, Patrick.

The dollar was the one US asset that did poorly last year. The dollar lost nearly 10% trade weighted. We do not expect to repeat in 2026. Now there is, of course, one big asset class that had that the US had a very notable 2025 in both directions. That is, of course, commodities. Oil has disappointed all of last year. We still do not expect a large rally in oil despite how much it has fallen. But base metals, copper has continued to rally, it's had a very strong 2025. It seems like it's set to continue in 2026, at least for the first few months of the year. I am not calling for a super cycle here, but I would not fear this move, at least for now. Precious metals is a little bit different. Silver and gold have had such strong moves that you're probably going to get a little bit of a breather. Overall, though, if you asked me on the commodities front,  with the exception of the energy complex, I'm still positively inclined.

Patrick
Okay, Ajay, thank you so much for joining us today. We will definitely get you back on the Barclays Brief at some point, in Q2, no doubt for your big picture views. But I understand you're over in Asia right now, and you've got to go and see some thoughts. So, thanks for joining.

Ajay 
Thanks, Patrick. It's always fun to be back on the Barclays Brief.

Patrick
As ever. It's great to have Ajay on the show. We've covered a lot and there's a lot more we can talk about on the Barclays Brief in 2026. Make sure you hit like and subscribe to get notified of the next episode. And we look forward to seeing you there.