A taste of things to come

The global economy is still cooking up decent enough food, but the kitchen is one heck of a mess. If 2025 felt like an episode of The Bear - chaotic, high-stakes, and full of unexpected twists - 2026 promises more of the same.

The strong spices that threatened to overpower the dish last year are still scattered across the counter; ‘Liberation Day’ tariffs and new NATO targets for defence spending being the main ones. As for Ukraine, a forced peace deal could bring not stability but new long-term threats. Europe will have to make up its mind how it can decouple its security architecture from the US for good and, above all, fast.

Geopolitically, the world remains a boiling pot of uncertainty. We’re still to get the US Supreme Court’s tariff rulings, and the trade tensions between the US and China, and increasingly between Europe and Beijing, appear to be baked into a new normal.

Yet, despite all the heat, financial markets and the global economy remained relatively unscathed.

As we look to 2026, we can say that after being somewhat overcooked, the American economy is moving to a gentle simmer. Sure, there’ll be turbulence. And then we may have to look to the Executive Chefs for more guidance with their pinches of extra fiscal stimulus or interest rate cuts. Remember, we’ll still feel the delayed impact of higher tariffs next year, and there’s also the effect of all that AI spending. No one can yet say if that’s a bubble.

As for Europe, the Master Chef is Germany. Growth prospects hinge on whether Berlin can finally serve up its promised spending boost. So far, very little has hit the plate, and the scraps we do have taste like sauerkraut. But if stimulus behaves like an old ketchup bottle - nothing, nothing, then everything - it’s certainly way too early to give up on German growth. The ketchup splurge would even mask the taste of too few structural reforms, at least for a bit.

I’m often asked about the biggest risks to Europe’s outlook. The answer is simple: Europe itself. If policymakers deliver, and ideally accelerate their 2025 commitments on defence and infrastructure spending and start implementing Mario Draghi’s recommendations, Europe could surprise to the upside. If not… well, let’s not spoil the festive mood.

Traditionally, the head chefs of the financial kitchen are indeed the central bankers. They can conjure up anything from a 'Calvinist Soup' to the fanciest dessert. In 2026, their job will be even harder than last year. Inflation could swing from disinflationary pressures, with cooling labour markets, weaker demand, and AI. But there also could be inflationary shocks from tariffs, supply constraints, and energy prices.

On top of these inflation swings, fiscal policy is serving an all-you-can-eat buffet, leaving central banks to pick up the tab. In this environment, monetary policy becomes less science, more art, which brings us back to the chaotic Bear kitchen. The hero of the show often improvises spectacular creations under enormous pressure. But in 2026, the ingredients may be so unfamiliar, and the heat just too intense, that we, the diners, won't be presented with anything we're ever going to enjoy. In fact, some might actually just refuse to pay the bill.

We wanted to throw some extra ingredients into our Outlook mix this year; no one ever wants a meal lacking in flavour. So, you'll see that we have ING's base case in each of our articles. This is our best bet on what's going to happen in 2026 - our house view, if you like.

But then the extra seasoning comes from our 'risky' calls. These are things that could well happen if certain circumstances allow.

And for the extra touch, savour our 'bold calls'. These are us going out on a bit of a limb. By no means are they outrageous, but conceivably, every one could indeed come to pass next year.

From all of us at ING Research, a happy new year! We'll be with you all the way.