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As the year draws to a close, the global economy presents a divided picture: while US economic momentum appears to be losing some steam in the short term, Europe is cautiously stabilising thanks to rising public spending. In capital markets, regional differences and political impulses are moving into sharper focus. “One thing is certain,” says Thorsten Fischer, Managing Director and Head of Portfolio Management at Moventum AM: “2026 will be a very exciting year.”

At year-end, the global economy remains fragmented. On the other side of the Atlantic, signs of a mild, short-term slowdown are increasing. Although the US economy still appears robust at first glance, “beneath the surface, early signs of fatigue are emerging,” Fischer notes. Numerous leading indicators, including the Conference Board’s Leading Indicators, have slipped into negative territory. Industrial activity remains in contraction, while the services sector is expanding only moderately. The labour market is cooling noticeably – wage growth has been declining for four years, reinforced by falling migration.

Particularly striking is the weakness in consumption, which accounts for around 70 per cent of US gross domestic product (GDP). Higher-income households continue to support demand, while lower-income groups are forced to cut back on spending due to limited financial leeway. Consumer sentiment is at its lowest level since 2022. As a result, despite the Atlanta Fed’s GDPNow model recently signalling robust growth of 3.9 per cent, sentiment remains subdued – a warning signal for the coming quarters.

Over the medium term, however, the outlook remains brighter. At its December meeting, the Fed not only implemented another 25-basis-point step but also began quantitative easing. From mid-2026, under new leadership, the Fed could further extend the rate-cutting cycle. In addition, deregulation initiatives, tax relief and fiscal programmes – most notably the Big Beautiful Bill – promise fresh growth impulses. The ongoing AI investment cycle is likely to provide structural support to productivity and demand. “Our base scenario is therefore a short-term dip in growth, followed by a reacceleration supported by monetary and fiscal policy,” Fischer explains.

In Europe, initial signs of stabilisation are emerging after a period of weakness. Fiscal programmes – including Germany’s special funds, substantial EU funding for Italy, and investments in infrastructure and defence – are supporting economic activity. Germany, Italy and Spain are acting as cyclical anchors. France, by contrast, remains the greatest source of uncertainty, as political tensions and budgetary concerns are dampening investment. Purchasing managers’ indices also point to a two-speed economy: services are expanding moderately, while industry remains in contraction. US tariffs and competition from China continue to weigh on the industrial sector. Consumer sentiment is recovering only slowly, with a sustained upswing not expected until 2026/27. The European Central Bank is currently adopting a neutral stance, with no further rate cuts in sight for the time being.

“Investors are therefore operating in an environment of regional divergence, in which political factors are increasingly influencing growth,” says Fischer. In the US, corporate earnings remain a pillar of the markets: average net margins in the S&P 500 are just under 12 per cent, and around 25 per cent for the tech giants known as the Magnificent 7 – both driven by efficiency gains and AI-related productivity. “From a historical perspective, however, valuations are high,” Fischer cautions. “This increases vulnerability to temporary corrections.” From a tactical standpoint, the assessment remains neutral. Over the medium term, growth and small-cap segments in particular offer attractive opportunities, supported by structural growth and declining interest rates.

European equities, by contrast, continue to trade at more attractive valuations. Earnings expectations could improve in 2026, supported by public investment programmes in energy, infrastructure and security. “Nevertheless, political uncertainty and hesitant fiscal policy are limiting upside potential in the short term,” Fischer notes. Over a three- to twelve-month horizon, the scenario remains neutral, with pullbacks offering entry opportunities.

Fischer’s conclusion: the US faces a mild short-term slowdown before structural drivers underpin a recovery. Europe is stabilising gradually, driven by fiscal measures. Political risks remain the number one uncertainty factor. “For investors, this means heightened vigilance,” Fischer says. “Relying on the trend alone will not be sufficient.”