Strategies, Risks & Opportunities The Outlook to 2026 Markets

I'm so great to be here. What an an audience. What an auditorium. What an event. Thank you all for being here with me today.

And thank you again to our hosts, ADGM and Abu Dhabi Finance Week. I'm so thrilled. I've been covering this event since its inception and it just keeps getting bigger and bigger. And the auditorium that I'm looking at is just a signal of that. So, thank you so much.

I'm so excited to be joined by this brilliant panel today and we're going to look at what's going to shape markets and just everything that I cover on CNBC next year. So, let's just start. Let me let me let the experts speak. John, Roger, Stephen, thank you again. What do you think?

We've we've seen so much this year, shifting rates, rapid innovation, geopolitical recalibration, and we'll talk about all of those in more detail soon, but as we look towards next year, John, I'll start with you. What is the single biggest force that you think will shape global markets?

So, I think we are all becoming acclimated to the uncertainty that we've lived with over the last couple of years. I'm not sure that the uncertainty will necessarily resolve, but I think we all continue to navigate global markets and uncertainty, if anything, is becoming the new norm. I also think that as we enter the 2026 calendar year, there'll be an important midterm election in the United States and other elections around the world that always seemingly have influence over the direction of of markets and I think 2026 will be no different.

Yeah, a lot to happen over state side and we'll talk about that in a moment. Roger, what do you see as the biggest kind of force shaping global markets and any black swans on the horizon? Well, look, it's always hard to observe black fund for they occur. Obviously, as a former central banker, I'd say my definition of monetary policy out of the US, but more broadly, um, I think we'll be a continuing major force. It will not end yet, but I think the next thing that's going to start to become a little clearer unfolding over time is the AI story.

Who are the winners? Who are the losers? But most importantly, how is it affecting profitability, which will then drive markets? And the final thing obviously and this may be in the black swan story you know global uncertainty I think will continue with us. I I don't think that there's yet and probably won't be next year great clarity around the interaction with with the global powers which I think actually will be very positive for Abu Dhabi uh as one of the crossroads of the world.

Yeah, we'll talk about that a bit and it's so great to have you here visiting Abu Dhabi and we'll talk a bit about what you're seeing as well as you come here to the region. Stephen, what do you see just quickly ahead as perhaps the biggest force shaping global markets next year?

Well, I think there are three themes that have resonated here already. One is we should assume that volatility will continue in capital markets. That's all capital markets uh during the course uh of next year. Secondly, central bank themes become very important. In fact, they become very important over the course of the next two weeks.

I think central banks will be critical. Uh and I think also you've heard and have heard much yesterday and today about the technology revolution that is underway. That's an industrial revolution. It's not just a technology revolution. So I think those three things will really define what happens through the course of 2026.

It

is I'm so happy I have the former vice chairman of the Fed on Fed day. I'm pretty lucky. But that's what we do on CNBC and we're going to cover it tomorrow. Um, we'll get to the Fed in a moment because there is a lot to talk about, but I want to talk about private credit first because it's something we've been covering a lot on CNBC recently over in the US and here with my colleague Dan. Um, Jamie Diamond said in October that when you see one cockroach, there are probably more.

I mean, I lived in New York. I I know what he's referring to. Um, but that is actually in reference to private credit. Um, are you worried, John, given the cracks we've seen recently? Yeah, look, I I think what we're witnessing is a multi-year, decadel long evolution of the private capital markets.

And it's not that the private capital markets are going to replace the public markets, but we're going to enter an era where the the notion of alternative assets, we we lose that moniker alto together and the private capital markets will coexist with the public capital markets. certainly happened in equities. It is now happening in credit uh first in the United States and now uh all places around the world. I'm going to use a different animal though for the analogy is that's a canary, but it's not a canary in the coal mine. Sometimes dead canary is a dead canary.

And I think some of the things that we're seeing in the private credit markets uh are just oneoff defaults that you see in any other lending market. And I don't necessarily see them as harbingers of what's to come. I I would also say that uh if I think about the two systems right the banking market and how that was funded partially by short-term deposits often levered 8 n 10 to one and then loans are made and the private capital markets where institutional investors asset owners uh can invest with professional managers and any one portfolio any one credit is just one of many within their uh underlying ecosystem. I I think that's just a much better way to finance private capital markets overall where the risk is atomized and really spread across the entire ecosystem in much more discreet ways. So I I see the advantages of private capital markets.

I don't see this as one cockroach followed by many. I don't even see this as a canary in the coal mine. I just see it as one or two dead canaries. It's interesting, right? Because the cohesion between public and private markets is something we talk about a lot and capital is just more readily available.

Companies don't need to list um before they gain, you know, get capital. It actually can be through private markets. And this is kind of changing the game though. Do you think it's a positive change?

I do think it's I mean, look, there's a in the olden days like when a company went private, it was a big deal. When a company went public, it was a big deal. There were fewer public companies today. And in fact, the venture industry woke up to this a decade ago where some of the leading private ventureback companies stay private until they're 10, 20, 50, hundred billion dollars in value. All of those gains have accred to the private markets.

Um, what is interesting about private credit markets is that there is this symbiotic relationship with private equity managers. And in fact, I would argue that when there's a workout, when there's a default, and under the old model, it would be handed to a a workout team within there, oftentimes the companies are the ones that would suffer the most from that capital structure as opposed to the opportunity to continue to work the capital structure, inject additional equity, and really work to reshape the business and and have the benefit of additional duration. So I think the symbiotic relationship is a positive and we've seen that over the course of the last decade. It's

interesting. Roger, I'll come to you on the Fed in a moment, but I want to go to Stephen quickly and and shift to the US a little bit. We think about some of the kind of favorable policy backdrops. We're seeing economists of course expecting the Fed to continue easing rates, the big beautiful bill which could lower corporate taxes and deregulation is obviously a priority. We haven't really seen all of this occur outside of a recession.

this obviously is going to support equity val valuations. How does that help you in in your positioning and what are you looking at next year when it comes to the United States?

So I think the United States is going to continue to be um one of the engines of growth in the world. In part the Fed again is awake at the switch. Um you know I think they are clearly concerned about things slowing too much. Um we will have of course the uh midterm elections which will add some noise. We'll put it that way.

uh but it turns out that you know markets in general have not been phased by that. I think the bigger question um on the equity markets will be is the market going to expand beyond you know the mag seven or 10 whatever it may be and that depends very much on profits and profitability which goes back to the question of the adoption of technology and how quickly that comes into play and I think the other thing that's going to affect the US market is and the US overall is this bifurcation that we see in consumers we're now calling it Kay-shaped economy.

Yeah.

So there are number of uh you know call it the top 30 or 40%

exposure to equity markets doing really quite well uh the bottom call it 60% or so which includes really the middle income struggling a little bit. Um, and the the final point I'd make, and it was the president has been talking about this, the degree to which the Trump administration wanting to seal the possibility of doing well in the midterms, wanting to respond to some of the concerns, is ready to open the fiscal wallet even more to support consumers. Um, so there's now talk about a bill of many billion dollars supporting our farmers sector. And so I think there are many things that are going to keep the US still as uh the engine of growth. Um though I would say there are some elements of fragility that might be starting to emerge.

So interesting. So still the engine of growth in the US. And then Stephen, you know, as you position at Barclays, what do you think about the US next year? Are there some kind of canaries in the coal mine when we talk about private markets in in public markets specifically in reference to this AI bubble that we're all talking about? Well, I'm not an entomologist, so I can't talk about cockroaches, but I I do think that what you've seen already this year is a diversification of equity risk.

Uh you've seen the US equity market perform relatively well. Equity is $120 trillion asset class. Uh you've seen large participation from retail uh in the US. But outside of that, that by the way is driven by technology innovation of course. But you've already begun to see some diversification in equities as an asset class.

Uh the performance of Europe this year, the performance of Asia this year should not be underestimated and I think that diversification becomes extremely important. So I think the US will continue to be at the forefront of capital formation. That's public capital, private capital. uh it has a policy formation that can enable that. Uh so I think that will continue to be very constructive but you've already seen a pretty large diversification process underway and I would extend that to uh other asset classes this year.

You've seen gold perform exceptionally well. That's a 20 trillion asset class that people are trying to squeeze themselves into. Uh and that's why you've seen gold go up 60% this year. Uh I think you've seen uh cryptocurrencies which are a $4 trillion asset class what a ride

accrete very very quickly and retreat very very quickly of which Bitcoin's about two trillion of that crypto asset class. So I think you're already seeing a diversification of investment strategies uh away from the US but the US will still be the center of capital formation and innovation. Um but you're definitely seeing a broader diversification pattern emerge. Yeah. And a broadening out of the rally, do you think?

Because right now that growth is really being driven by just a handful of stocks as you all know. Is that going to broaden out just like Roger said, do you think, Stephen?

I I would expect that to happen. I I do think that innovation AI should see a democratization of smaller companies, enable them to compete against larger companies.

So, as you see, business models adjust further down the market cap spectrum. And I think John's right by the way that you can stay private a lot longer so you can operate in the private world, adjust your business model in the private world. I think that that will be a a continued theme.

Roger, I'll come back to you. You were former vice chairman of the Fed. It's Fed Day, but it's not just Fed day because President Trump is expected to make a decision early next year on the next Fed chair. And the front runner, as you all know, is currently Kevin Hasset. he's viewed more doubbish um as his his other as the other candidates that that that everyone was looking at.

But when you think about this, what do you what do you feel is the worry in the market about the Fed's independence other under President Trump?

So, look a couple points I always make. First, I should say that, you know, the every administration has some beef to pick with the Fed. You know, people always want interest rates lower. Uh they attempt to influence the Fed. uh Richard Nixon succeeded at at intimidating or pushing Arthur Burns.

So, first point, the Fed's independence is always a little bit challenged. What's different this time is one, how public, and two, the degree of it. So, we've never had a president that attempted to remove one of the Federal Reserve governors. We've never had a president that so openly disdained the chairman of the Fed. Um what I observe though is I think markets have priced in an expectation of stability more than anything else at this stage.

Point two, um the name that's now the front runner for the next year of the Fed is Kevin Hasset.

Y

I know him well. Many people do. He has um a long history as a Fed senior Fed staffer. He's been in and around uh this monetary policy for quite a while. So while it's not 100% certain what he's going to do, he is not a you know an unknown quantity coming in with a you know a highly contentious perspective.

The final point I'd make is as we've seen the Fed really is when it comes to monetary policym a committee of 19 people. Um the chair has to work hard to find the broad consensus. Um, we've seen in the most recent U meetings several descents and I think the Fed is and its policy makers are prepared to push even further. So I think there will be some limits on Kevin's ability to do anything that's outside of the broad range. And the last point I'd make is when all else fails, markets have a way of disciplining the Fed that they don't believe or trust.

Yeah.

Credibility in the market is central. The Fed has it right now. Kevin has it. if he's the next chair is not going to want to risk that for his own sake and his legacy. Um and so I at the end of the day I think we're seeing the most challenging moment for Fed independence and I think actually dependence is going to gradually swing back uh once we've got a new chair in place and once the Supreme Court decides on this this issue of of one of the Fed governors Lisa.

You have faith in the Fed.

Absolutely. [laughter] Um, I want to pivot now to to you, John. You just spoke to me backstage about the region and we were just talking. I I've lived here for nearly a decade um and just about the changes we've seen um right here in Abu Dhabi. John, you just opened an office here.

Um, talk to me about what Harbor Vest is doing here and what you've seen in the region, how it's changed. When was the first time you came to Abu Dhabi?

Oh, 2007.

Love it.

For fundraising on one of our secondary funds a long time ago.

Interesting. And how have you seen it change? and talk to me a little bit about what Harbor is doing here.

Yeah, so we I mean we for you know we're blessed to have earned the trust of some of the major investors here on the ground. We have been doing that for various programs over the course of the last decade plus and like we've seen in our playbook and now we're in 15 locations all around the world is that achieves a certain level of success on the ground. Uh and you get to the point where you just really need to benefit from being much more local. uh you know my four or five visits a year only takes us so far versus having uh local talent who who who knows uh the broader universe beyond the top 5 10 15 investors in a given market. And so for us it became time to to open an office in the region.

We knew we wanted to be in the UAE. We chose Abu Dhabi um specifically because of the clientele that we have here in in the region. And what's been fascinating to me to witness is just the growth of the infrastructure, the growth of the city here, and then more importantly as I think about a world that has becoming increasingly delobalized, right? We we have all benefited for decades of globalization around the world and that is starting to unwind. And as we start to get regionalized or decoupled across the globe, the UAE and Abu Dhabi in particular sits in a very interesting position, not just geographically, but at this connection point of both capital and connections around the world.

And so for us, it was a no-brainer to come here and and be on the ground.

So interesting. We talked a little bit about this backstage. Um, and I'll I'll come to you in a second, Stephen, because we I wanted to talk to you about the kind of shifting alliances, Roger. And we talked a little bit about this backstage, but Trump has played a very big role in this region. His first trip in both his his presidencies was to the Gulf um and then obviously here um back in May.

And so much happened mainly in the AI space. And I find it so interesting. I cover it a lot. and the kind of support from the Trump administration, the chips um ban being lifted and and kind of the partnership between the US and the Gulf. I want to ask you both, but I'll come to you first, Roger.

How do you see that kind of emerging partnership between the US and a middle power like the UAE?

Well, look, I think um Trump is very much trying to reset the table with a US face, US first perspective. Um, and without a doubt, given the points that we just heard about this area, this country and and and this emirate in particular being sort of a crossroads of the world, I think it's very smart for the US to cement relationships here. Uh, capital formations occurring here, some of the best and brightest ones that live and work here. And I think developing a strong link between this region and and the US is an important part of Trump's global strategy and one I think all of us can see and endorse. In many ways I think you know Abu Dhabi and and the region may well represent the best of the future and so I think US really wants to be here.

The relationship with Europe I think um is one of I would describe as a reset. You know, since the Second World War, the US has basically paid for, you know, the the national defense of of all of Europe. You know, there's the notion that European government should spend two to 3% on NATO. They have not done that.

Yeah.

Trump pushed really hard to drive that.

I'm not sure I agree with his tactics, but the general direction, I think, one understands. And the final thing everyone has to be careful of however is that long historical relationship with Europe can't be allowed to pray too much. You know they are still a major set of democratic countries that share US values and frankly we've discovered from the invasion of Ukraine that you know the hope for peace dividend uh in the Eurasian continent has not existed. So we really need Europe to play its part and we need to have trust and confidence between the US and

Yeah. But Trump's national security strategy last week, you know, I think you you read it. It said that Europe is risking civilizational um erasure and he's referring of course to mass migration and it's caused a huge schism um across Europe specifically in the UK. Um and we've seen the emergence of these populist parties. What's your read on that?

because there clearly is a divide between the Trump administration and what's going on in Europe.

I think there's a divide, but I think there's something much more important that's going on that's a global force that is reflected to some degree in Trump's words. And I think the issue that all democracies are facing is that after such a long period of uh what we call the great moderation. Um markets have done well. Central banks have come in to smooth out their perturbations of the market. And at the same time we see income and wealth inequality.

The pandemic pointed out health inequities and uncertainties. Um and we see frankly climate change. We see questions about the value of education. We see uncertainty about retirement security. So I think what's going on here is not civilization decline.

I think what's actually being talked about is the the tectonic plates of a number of long-term trends coming to roost that have led to populism around the world, immigration um being put back into the doghouse. But I think we need to sort of unpeel it and get down to the underlying forces which are these longer term trends that I think have now suddenly come together and led a world in which there are clearly halves and have nots and the have nots are not very happy with the halves and now trying to sort all that out in a democratic process. And I think at the end of the day, President Trump is not the person stirring the pot. He was the first person at his level to recognize the deep concern um and to really be driving it down this down this down this path. And so I would say less focus on the president, not because the president's unimportant, but more focus on what he stands for in terms of the the dissatisfaction that's starting to emerge

almost everywhere around the world. And it's interesting living here because everything it works here and it's a very different part of you know you you've come from the United States and the UK. I love living here because I'm separated from a lot of these conversations and I go home and I and I hear about it. So it's very interesting to hear your perspective on that. Um we've got a little bit of time left so I should really ask you more about the markets and not get into Trump's policies on Europe.

So I won't do that to you Stephen. Um equities next year bull or bear and where?

I I'm a bull. I'm a natural bull. Uh I think uh you might see the same shape uh as we've had this year where the US performs uh Europe in some parts uh performs. You may see uh a real focus on uh fiscal processes in Europe next year. Obviously Germany leading but you've had a 40% recovery in the Spanish market and you can see what's going on in Spain and Greece has done spectacularly well.

Many of the old emerging markets actually look like emerged markets now uh and are gaining a lot of traction. So I think you'll continue to see that performance. I think Asia actually could surprise everybody. Again, it's a back-to-back positive year. So I think you'll see continued performance of the Asian markets.

But you know much like John um this region is really spectacular and Barclays have been here for 50 years in the UAE. I've been coming here 30 years. It's a privilege to see what has happened in Abu Dhabi. I mean, really, it's a privilege seeing how it's evolved. Uh, and if you just look at the event that we're all at, 30,000 people applied to come here, which is truly extraordinary.

Yeah.

And systematic of the uh relevance of this region as it continues to monetize its own domestic corporations. You can see that listing protocol of many of the exchanges in the Middle East broadly. So, I think you'll continue to see a theme that says capital formation here is really important. It's nent but emerging very very quickly but importantly relevant for the region. uh and I think you'll see capital continue to evolve in this region for this region uh as it continues to grow in immense sophistication and relevance

super sophisticated capital and it's something I've seen covering and and as you know Abu Dhabi manages over $1.7 trillion in wealth nearly$2 trillion and they're really careful about how they deploy that capital and you know this better than I know you work with a lot of these funds it's so interesting to see and they're behind some of the biggest deals quietly that we've seen I think we were just talking backstage about Warner Brothers. Fascinating stuff and we're going to see a lot more of the Gulf's influence um in the years to come. John, I want to talk a little bit more about what you're doing globally as well. Where are you seeing some bright spots for next year in terms of capital deployment?

Yeah, look, I mean maybe even answering the question of Buller Bayer is tends where I mean look, I I probably have a little bit more muted look on the US equity public equity markets. I I think that the extraordinary growth of the Magnificent 7 has really masked what I think is significantly uneven equity gains within the portfolio. Um if if you look you know 40% of the S&P 500 is down year to date. If you look at the gains the total gains 50 to 60% of the gains this year is from 10 companies. So public markets are becoming increasingly concentrated and people look at the aggregate returns and say well I'm doing quite well in the public markets but I think that's a much an increasingly narrow universe of companies today.

The S&P 500 is more concentrated than it has been in 50 years. And I think more investors around the world are becoming alive to that. And we're seeing the flight of capital out of the public markets into the private markets where today the fundraising has been stagnating because of the lack of liquidity in the existing institutional investors portfolio. But we continue to believe that if you are an investor with capital today, the private markets is an attractive source of durable excess returns and that has been true in the past and we see it certainly true today.

Light of copper. I love it. I wish I had more time. This was fantastic. Thank you so much for giving us all a direction into the future.

John, Roger, Steven, thank you so much. And thank you again Finance Week and enjoy the rest of your day. Thank you so much.