Key financial trends and challenges for 2026

We are entering 2026 at a unique point in the economic cycle. If 2024 was a year of fighting inflation and 2025 was a year of adapting to new political realities in the US, then 2026 will be a time when accumulated contradictions will need to be resolved. For traders, this means one thing: the period of “sluggish” index growth is over. An era of volatility is coming, caused by changes in central bank leadership, trade wars, and the introduction of AI into the real sector.

Let’s take a look at the key drivers that will move prices over the next 12 months.

1. Change of guard at the Fed: The end of the Powell era

Perhaps the most important event for global markets in the first half of 2026 is the end of Jerome Powell’s term as head of the US Federal Reserve in May.

Why is this critical?

Markets have become accustomed to Powell’s style: his caution, his ability to balance between “hawks” and “doves.” The appointment of a new successor is always stressful. Given the political landscape in Washington, there is a risk that a candidate more loyal to the government will be appointed, who may sacrifice the Fed’s independence for the sake of low interest rates.

A number of candidates are being considered to replace Jerome Powell as Fed chair, with Kevin Hassett, Kevin Warsh, Scott Bessent, and current Fed members Michelle Bowman and Christopher Waller among the favorites. On platforms such as Kalshi and Polymarket, Hesset’s odds briefly rose to 85%, then fell to around 72%. Warsh’s odds are estimated at around 13%, and Waller’s at around 5%.

President Trump is interested in a candidate who is willing to cut rates to support the economy ahead of the election. Hassett was an early favorite, but his selection is not guaranteed. His close ties to Trump could lead to support for “excessive” rate cuts. These concerns are circulating within the Treasury Department and among bond market economists, who fear that aggressive cuts could push inflation higher and destabilize the $30 trillion bond market.

Impact on instruments:

– USD: Expect increased volatility in the dollar index (DXY) in March-May. Any hints of the Fed becoming “politicized” could weaken the dollar.

– Gold (XAU/USD): Gold traditionally acts as a hedge against loss of confidence in fiat currencies. If the new Fed chair appears too dovish, gold could once again reach historic highs.

2. Trade wars 2.0

By 2026, the impact of US tariff policy will become tangible. Analysts are no longer just discussing threats – they are seeing them in company reports. Protectionism is becoming a global trend, affecting not only US-China relations, but also China’s relations with the European Union.

What does this mean for the markets?

The world is fragmenting into trade blocs. This is driving up “transitory” inflation due to the restructuring of logistics chains.

Impact on instruments:

EUR/USD: The euro is under double pressure. On the one hand, there are US tariffs on the European auto industry, and on the other, the ECB needs to keep rates lower than the US to support the weakening industries of Germany and France. A parity test is expected within the year.

Commodities: Friction with China could cause sharp spikes in copper and lithium prices, as China controls most of the processing of these metals.

3. Monetary divergence: Fed vs. ECB and Bank of Japan

In 2026, we will see a rare spectacle – the desynchronization of the actions of the largest central banks.

1. Fed: Most likely, it will stabilize rates in the range of 3.5%-4.0% in an attempt to curb Trump’s fiscal stimulus.
2. ECB: It will be forced to continue easing (QE or rate cuts) to save the EU economy from recession.
3. Bank of Japan (BoJ): The most interesting dark horse. Japan is slowly but surely moving away from its negative interest rate policy. In 2026, the yen could become the main beneficiary of carry trade unwinding (the unwinding of transactions based on interest rate differentials).

Trading idea: Buy JPY against EUR, USD or AUD amid rising Japanese government bond (JGB) yields.

4. AI: From hype to implementation

If in 2024-2025 investors bought up everything with the prefix “AI,” then 2026 will be the “year of checking the facts.” The market will demand real profit growth from the implementation of technologies, not just promises. And if this does not happen, there is a high probability that the AI hype will burst. This could lead to a change in leadership in the technology sector.

Impact on instruments:

Nasdaq index (US100): Shift to higher selectivity. The index may grow more slowly, but strong rotation will begin within it. Increased volatility, sharp short-term corrections are possible.

Big Tech stocks: Increased volatility during reporting seasons. The slightest discrepancy in margin forecasts will lead to big sell-offs.

5. Geopolitical “black swans”

The year 2026 will be rich in political events that could redraw the map of risks:

5.1. Peace in Ukraine and its consequences 

One of the most anticipated and at the same time unpredictable events of 2026 remains the potential conclusion of a peace treaty or long-term truce between Russia and Ukraine. By the beginning of the year, markets had already begun to factor in a “de-escalation premium,” but the actual signing of the documents will cause tectonic shifts.

What does this mean for the markets?

– A reverse commodity shock: A peace treaty will inevitably raise the question of lifting or easing sanctions. The return of Russian energy resources to the legal European market (even partial) will create an oversupply. Brent crude oil may test the $50-$55 levels, and natural gas prices in Europe may collapse, which will be a powerful stimulus for the recovery of German industry.

– Reconstruction Play: Europe will finally get rid of its huge risk premium. This will trigger a massive influx of capital into European stock indices (DAX, CAC 40). Investors will also start looking for profits in the reconstruction of Ukraine. Shares of European construction giants, cement producers, and energy equipment manufacturers (e.g., Siemens, Holcim) could see double-digit growth.

– Exchange rates: The euro will receive strong support as the currency of a region free from the immediate threat of a major war. The EUR/USD pair may rush towards 1.20 and above.

5.2. Political crisis in the US

In 2026, US domestic politics will be the main source of volatility for the dollar. Against the backdrop of midterm congressional elections (November 2026), the level of confrontation between the White House and the opposition will reach its peak. If the Republicans lose control of one of the chambers, the administration will find itself in a weak position, which will paralyze budget spending. Markets usually like a divided government (fewer sudden changes), but this will add to the nervousness of the debt markets. Moreover, there is also the possibility of President Trump being impeached.  Forecasting markets (Polymarket and others) estimate the probability of Donald Trump’s impeachment proceedings beginning in early 2026 at approximately 15-20%. However, even if the proceedings do not result in resignation (which requires a two-thirds vote in the Senate), the process itself will create a “paralysis of power.”

What does this mean for the markets?

Dollar Index (DXY): Political instability in the world’s largest economy is traditionally a bad sign for the national currency. We may see a “flight to quality,” but not into the dollar, but into gold (XAU) and the Swiss franc (CHF).

Bond market (Treasuries): Uncertainty surrounding fiscal policy and the threat of impeachment could lead to a sell-off of US government bonds, pushing 10-year yields above 5%. Traders should be prepared for sharp movements in pairs with the yen (USD/JPY).

5.3. The Taiwan issue

Tensions in the South China Sea will remain the number one background risk, capable of dampening risk appetite at any moment. In 2026, tensions in the Taiwan Strait and the South China Sea will move from the category of “chronic problems” to a phase of critical escalation. Analysts at major investment banks (Goldman Sachs, Morgan Stanley) are already including an “island blockade” scenario in their stress tests.

Why is this important right now?

By 2026, Taiwan (represented by TSMC) continues to control more than 90% of the production of the most advanced chips (less than 3 nm) needed for AI, supercomputers, and military equipment. Any escalation is not just a regional conflict, but an instant shutdown of the global tech sector.

If Beijing decides not to engage in direct conflict but instead establishes a sea and air blockade of the island under the pretext of military exercises (which we already saw at the end of 2025), global supply chains will come to a standstill within 2-3 weeks.

Impact on instruments:

Semiconductor sector (SOX Index): A direct hit on Nvidia, Apple, AMD, and Intel shares. A 30-50% collapse of the sector is possible in the short term.

Safe-haven assets: Gold will instantly break through psychological levels and could easily jump above $5,000 per ounce as investors seek protection.

Logistics and insurance: Freight costs in Southeast Asia will skyrocket, driving global inflation faster than any action by the Fed.

5.4 The Venezuelan gambit

If Ukraine and Taiwan are risks that the market has already grown accustomed to, then the deterioration of relations between Washington and Caracas in 2026 could become the very “forgotten factor” that tips the energy balance.

The essence of the conflict: A change in US strategy

By 2026, the policy of “soft pressure” on Nicolas Maduro’s administration has finally reached an impasse. Against the backdrop of pre-election rhetoric in the US (or already actions by the new administration), the issue of Venezuelan oil has ceased to be purely economic. The White House is considering the possibility of completely revoking licenses for Western companies (including Chevron) and imposing a strict naval blockade to stop supplies to China and India.

Risk of direct intervention: Speculation about “regime change” in Venezuela in 2026 has reached its peak. Any US military maneuvers in the Caribbean will be perceived by the market as a signal for an immediate revision of energy prices. Territorial dispute with Guyana: Don’t forget about Essequibo. If Caracas decides to play the “small victorious war” card against its neighbor, it will jeopardize ExxonMobil’s deepwater projects, which are a key source of new oil for the global market.

• Risk of direct intervention: Speculation about “regime change” in Venezuela in 2026 has reached its peak. Any US military maneuvers in the Caribbean will be perceived by the market as a signal for an immediate revision of energy prices.
• Territorial dispute with Guyana: Don’t forget about Essequibo. If Caracas decides to play the “small victorious war” card against its neighbor, it will jeopardize ExxonMobil’s deepwater projects, which are a key source of new oil for the global market.

What does this mean for instruments?

Heavy-Sour Crude: Venezuela has the world’s largest reserves of extra-heavy crude oil. Its disappearance from the market will hit refineries on the US Gulf Coast, which are specifically designed to process this type of oil.

Diesel spread: Since Venezuelan oil has a high diesel yield, the conflict will trigger a sharp rise in diesel prices worldwide. For traders, this is a signal to buy Heating Oil or Gasoil futures.

Latin American currencies: Political chaos in the region will undermine the Colombian peso (COP) and Brazilian real (BRL). Traders will exit Latin American assets in favor of more stable “safe havens.”

Summary table that combines macroeconomics, geopolitics, and specific trading recommendations for 2026.

Key points:

1. Gold is the “king” of 2026: It wins in almost any scenario (Taiwan geopolitics, US inflation, or impeachment chaos).
2. Energy arbitrage: Traders need to keep an eye on the pair “Peace in Ukraine” (falling oil prices) versus “Crisis in Venezuela” (rising oil prices). These two events may offset each other.
3. Europe as the “buy deal” of the decade: In the event of de-escalation in the east, the European market could see its best growth in 15 years thanks to cheap energy and a recovery in demand.