I have been having sobering conversations with clients regarding investment outlook in 2026. Most people are worried about the directions of the economy, geopolitics and disruptions of industries via AI, etc. Undoubtedly, the world is changing fast, in the investment industry, we call it regime changes. It means the old rules between variables that held true won’t correlate in the same way. As our capital markets team pour over industry data, the words AI and disruptions are focal points for discussion in boardrooms across the U.S. and Canada.

Coming into 2026, the general sentiments are upbeat and the outlook for the economic growth is positive.We will start by breaking down some economic tailwinds the RBC Economics team sees for 2026.

The clock has not yet run out on the recent monetary easing cycle started in 2025. Monetary policies operate in a lagging fashion, and we should see more of the stimulative effect in 2026. On the fiscal front, many of the tax cutting initiatives from the Big Beautiful Bill Act will take effect in 2026. Strong stock market performances combined with weak oil prices provide a cushion to consumer sentiments and finally, AI capital expenditures and increases in AI productivity will continue to be a dominant theme for years to come.

Growth tailwinds for 2026

Note: As of 12/02/2025. Source: RBC GAM

However, not all is rosy, as it is often the case there are cross currents in the economy, and we need to brace for tailwinds as well as headwinds.

 The Trump administration is unpredictable and U.S. government shutdowns have been more frequent. The lack of stability in policy setting makes it difficult for companies to commit to investments for long term growth. There are, however, themes such as bringing manufacturing capabilities back to the U.S. as well as resource independence in rare earth minerals that have strong bipartisan support. Higher defense spending is another area that is agreed on by both political parties. As the U.S. government intervene more actively in market forces, political and policy decisions will play a more central role in the economic trajectory and industry sector importance.

From an investment lens, another notable trend is the outperformance of international markets in 2025, and the strong relative performances of the international markets have continued into 2026 year to date. Much of this shift has been driven by a desire to diversify exposure from the U.S. technology behemoths but also the U.S. economy overall as the country sets out on a more unpredictable path in international diplomacy.

Global Fiscal-health scorecard

Source: IMF, Macrobond, RBC GAM

For investors that have been able to participate in the stock market growth, they have been richly rewarded. However, the path to achieve this growth has not been a smooth ride. Over the past decade, there has been spikes in volatility cause by tariff tantrum, the pandemic and inflation and growth scare in 2018 and 2022 just to name a few.

The richest Americans have disproportionately benefited from stock-market gains

Source: Federal Reserve, Macrobond, RBC GAM as of Q2 2025

In the U.S. markets, AI centered growth, manufacturing reshoring, supply chain diversification and supply of labor are important thematic trends to stay on top of. We are watching the recent relative strength in the international markets closely as there is a growing need for more diversification from large U.S. tech.

In times of uncertainty and rapid change, we remain vigilant in striking a balance between protection of capital from disruptive forces and uncovering green shoots in the economy to achieve stability and compound growth.