The Compass 2026: Geoeconomic Adjustments Ahead

The document is a report titled 'The Compass 2026' published by The Investment Institute at UniCredit. It provides an analysis of the anticipated economic landscape for 2026, focusing on the aftereffects of political changes, particularly those associated with US President Donald Trump's policies. The report outlines the potential for continued geoeconomic friction without escalating into a full-blown trade war, emphasizing the importance of navigating this new normal for policymakers and businesses. It discusses the implications of Trump's protectionist strategies, including sustained high tariffs and their impact on global trade dynamics. The report also highlights the ongoing US-China rivalry, particularly in high-tech sectors, and the precarious position of Europe caught between these two superpowers. Additionally, it addresses the expected market consequences, including the performance of equities and the US dollar, while cautioning about the risks associated with the AI investment surge and the potential for overinvestment in AI infrastructure. Overall, the report presents a cautious outlook for the upcoming year.